Apex Research said over the near term, Pekat could secure up to RM200mil in EPCC contracts.
PETALING JAYA: Pekat Group Bhd
is expected to secure Corporate Green Power Programme (CGPP)-related engineering, procurement, construction and commissioning (EPCC) jobs that could boost its order book to RM320mil by the fourth quarter of 2024 (4Q24).
The group’s latest win lifts its outstanding order book to about RM206.8mil, the bulk of which is for rooftop solar projects.
Its latest contract worth RM21.8mil is for an earthing and lightning protection (ELP) systems from Gamuda Engineering Sdn Bhd.
MIDF Research said future order book replenishment prospects will come from EPCC jobs related to the latest phase of the government’s Large Scale Solar initiative.
Large Scale Solar or LSS is a competitive bidding programme to drive down the Levelised Cost of Energy for the development of large scale solar photovoltaic plants, with the Energy Commission acting as the implementing agency for thescheme.
Apex Research said over the near term, Pekat could secure up to RM200mil in EPCC contracts.
Pekat’s financial year 2024 (FY24) earnings are expected to improve mainly on recognition from existing unbilled projects and recognition from CGPP projects. The latest ELP contract will be recognised till FY25, it added.
MIDF Research said Pekat is expected to release its 2Q24 financial results on Aug 21 and it believes the performance will be in line with its FY24 expectations of about RM8mil to RM9mil in the first half of FY24.
This will mainly be driven by commercial and industrial and residential rooftop solar jobs.
The research house did not make any changes to its earnings estimates as the subcontract win is within expectations.
Both MIDF Research and Apex Research retained their “buy’’ calls on the stock.
MIDF Research maintained its target price at RM1.32 a share, pegging its forecast FY25 earnings per share of 4.7 sen to a forward price-earnings ratio of 28 times, based on the company’s three-year historical mean.
Apex Research upgraded its target price to RM1.20 from RM1.14 a share.
It favours Pekat for its synergistic business model, attractive in-house solar financing offerings, lucrative margins from its stake in medium voltage electrical switchgear maker EPE Switchgear (M) Sdn Bhd (EPE) and its consistent maintenance of an order book worth about RM200mil.
It believes Pekat is well positioned as one of the renewable energy players benefiting from long-term National Energy Transition Roadmap trends, potentially generating strong earnings visibility in the foreseeable future.
The risks cited to its call include the EPE acquisition taking longer than expected, reversal of solar module prices and CGPP project recognition being slower than anticipated and intense market competition.
MIDF Research added that it is optimistic about the group’s proposed acquisition of 60% of Apex Power, which will give it control over EPE.
This allows it to expand its business into power distribution equipment and to tap into new foreign markets, which is expected to strengthen its bottom line significantly starting FY25.
