Thursday 28 Mar 2024
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KUALA LUMPUR (Jan 13): Maybank Investment Bank (IB) Research said Thursday that it expects an earnings recovery for renewable energy (RE) stocks as movement restrictions are eased and work momentum for solar installations catches up.

According to its analyst Nur Farah Syifaa’, the recently launched Malaysia Renewable Energy Roadmap (MyRER) for 2022 to 2035 is expected to boost RE from 23% or 8.45 gigawatt (GW) of national installed capacity mix in 2020, to 31% in 2025, and 40% in 2035.

“The strategic pillars for the RE growth will continue to leverage on the existing untapped resources i.e. solar PV (photovoltaic), bioenergy and hydro. New technologies and resources are also expected to support the MyRER post-2025,” she said.

As of 2020, she said solar PV accounted for 1.5GW of RE capacity, and this is expected to jump to 4.7GW by 2025, and 7.2GW by 2035.

According to her, the solar energy pillar is built upon existing programmes — net energy metering and large scale solar (LSS) — but is to be complemented with the possibility of introducing new business models such as corporate power purchase agreements, third party access, peer-to-peer energy trading and monetisation of RE certificates.

Other energy pillars to increase RE capacity also include bioenergy (e.g. biomass, biogas, waste-to-energy [WTE]), hydro as well as potential new technology and solutions post-2025, for example battery storage and hydrogen solution, she added.

While she expects the tender for LSS5 to be opened this year, she said tariff reference is expected to be higher than LSS4 (lowest bid at 13.99 sen/kilowatt hour), due to major procurement and supply chain disruptions that led to increase in solar-related material prices.

“We believe the disruptions will also pose a temporary risk to project execution and potential delays in existing solar project installations into the second half of 2022,” she said.

She remains positive on the sector, with "buy" ratings for Cypark Resources Bhd (target price [TP]: RM1.35) and Solarvest Holdings Bhd (TP: RM1.45).

She said the strong order book for Solarvest at RM635 million will continue to support its earnings growth.

Meanwhile, she said the earnings profile for Cypark is expected to improve as its RE portfolio is to grow from FY22 onwards, whereby it expects to manage and operate a combined solar capacity of 230 megawatt (MW), from 40MW currently, as well as kick-start its first 25MW WTE plant.

At the time of writing, Solarvest slipped one sen or 0.79% to RM1.26, valuing the group at RM847.79 million.

Cypark was unchanged 89.5 sen, valuing the group at RM533.83 million.

Edited ByJoyce Goh
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