BM Greentech Berhad (BMGREEN) announced the acquisition of Plus Xnergy Holdings Sdn Bhd (PXH), a solar photovoltaic (PV) system engineering, procurement, and construction (EPC) contractor, for RM110 million.
The acquisition will be satisfied with 81.5 million new BMGREEN shares issued at RM1.35 per share, increasing the company’s enlarged share base by 12.5%.
Kenanga Investment Bank (Kenanga), in their report (on June 19, 2024) raised its FY25-26 EPS forecasts for BMGREEN by 6% and 4%, respectively, and increased the target price (TP) by 13% to RM1.30 from RM1.15. Despite these adjustments, Kenanga maintained its underperform rating for BMGREEN.
PXH, specialising in industrial, commercial, residential, and large-scale solar (LSS) projects, comes with an accumulated profit guarantee of RM44 million over four years. Post-acquisition, PXH’s vendor will continue to manage the business.
The acquisition values PXH at 10x FY25 forecasted PER, a discount compared to the 30x forward earnings of comparable companies like SLVEST and SAMAIDEN.
QL, the largest shareholder of BMGREEN, will see its stake diluted to 45.4% from 52.6%. To maintain QL’s shareholding above 50%, BMGREEN plans a special issuance of at least 55 million new shares to QL at the same RM1.35 per share, translating to RM74 million in net proceeds.
Kenanga viewed the acquisition positively, noting that it would enhance BMGREEN’s solar segment by adding LSS projects to its portfolio.
PXH has a proven track record with over 400MWp of installed solar PV capacity since 2013. Moving forward, BMGREEN’s solar segment is expected to contribute about 30% of the group’s profit after tax (PAT).
Kenanga rationalised its valuation basis for BMGREEN using a sum-of-parts (SoP) method. It ascribed a 13x FY26 forecasted PER for the bioenergy services division and a 30x FY26 forecasted PER for the EPCC segment, aligning with the average historical forward PER of the solar EPCC sector.
BMGREEN’s investment appeal lies in the long-term trend of upgrading palm oil milling assets driven by increased ESG awareness, its strong customer base with industry leaders, and its expanding presence in the solar EPCC space.
However, with flat crude palm oil (CPO) prices, immediate-term capex cutbacks by planters could impact the company’s performance. Thus, Kenanga maintained its UNDERPERFORM rating for BMGREEN.
