PETALING JAYA: Sime Darby Property
’s (SDP) utilisation of its non-core landbank to develop utility-scale ground-mounted solar farms has RHB Research feeling positive over its outlook.
While it is unlikely to have a significant impact on its near-term earnings, the research outfit is in favour of SDP’s enhanced usage of an estimated 404.7ha of its landbank in Johor and Kedah for renewable energy purposes.
As part of its new venture in solar renewable energy, SDP has announced two pilot project proposals.
The first is to offer solar solutions in its existing townships by leasing rooftop space from residential homeowners and generate solar power of up to 150 megawatts (MW).
The other is the commissioning of utility scale ground mounted solar farms in Jerai, Kedah and Pagoh, Johor, with a potential capacity of 330 MW.
“The off-takers will be the industrial, commercial and retail users across SDP’s townships. SDP’s management has indicated that the company could be the generator, distributor and off-taker of the solar energy produced,” said the research house.
In addition, given the rising trend of renewable energy globally, the research house said it is encouraging to increasingly see more developers participating in solar energy generation.
RHB Research pointed out that only developers with a large landbank – especially with land plots in remote areas without near-term development opportunities, are able to take part in solar power generation.
“These are typically the government-linked investment companies and SDP is one of them. Other developers, with limited non-core land, will probably not get involved, given limited land resources.”
As such, it thinks SDP’s venture into renewable energy is sensible as the company currently has approximately 6,000 acres of non-core land, out of 19,000 acres of landbank in its portfolio.
This is especially relevant since SDP has no development plans over the near-to-medium term on its non-core land, making solar farming a good alternative for a more efficient use of land, said RHB Research.
“It will also help to kick-start development of greener townships where townships are both generators and off-takers of the solar energy produced.
“For example, the solar farm in Pagoh is expected to supply the power generated to its future industrial park in Bandar Universiti Pagoh (BUP), as the company intends to transform and integrate BUP with a new industrial zone that is more environmentally friendly and energy efficient,” it added.
Of note, it opined that SDP will attempt to seek funding to cover its solar farming capital expenditure from a few strategic investors, potentially using a similar structure such as its collaboration with Singaporean property management firm Logos SE Asia Pte Ltd.
On top of that, the research house noted that debt financing should also be viable as more commercial banks are offering green financing in Malaysia at a slightly lower interest rate.
As a result of SDP’s renewable energy-themed projects, RHB Research has maintained its “buy” call on the counter, but upgraded its target price to 67 sen, representing an upside of roughly 14%.
