Kenanga Investment Bank (Kenanga), in its latest report today, expressed an optimistic view on Malaysia’s renewable energy (RE) sector, particularly highlighting the robust outlook for photovoltaic (PV) system Engineering, Procurement, Construction, and Commissioning (EPCC) contractors.
Kenanga recommends an OVERWEIGHT stance on the RE sector, driven by significant contract opportunities in solar energy projects such as the Corporate Green Power Programme (CGPP) valued at RM2.4 billion and the upcoming 2GW Large-Scale Solar 5 (LSS5) worth RM5 billion. These initiatives are expected to spur investments and enhance margins for PV system EPCC contractors like SLVEST (OP; TP: RM1.91) and SAMAIDEN (OP; TP: RM1.51).
Under Malaysia’s National Energy Transition Roadmap, the government aims for RE to constitute 70% of total generation capacity by 2050, with solar energy contributing over 90%. Initiatives like the Feed-in Tariff (FiT), net energy metering (NEM), and LSS programmes are pivotal in achieving this target, fostering a conducive environment for PV system installations.
The CGPP, slated for completion by end-2025, is set to provide RM2.4 billion worth of PV system EPCC jobs, followed by the LSS5 programme launching in 2026 with an estimated RM5 billion in contracts spread across four packages.
Additionally, the NEM scheme’s new quota of 500MW, split between residential and commercial sectors, continues to facilitate private investment in solar energy assets. Businesses are increasingly adopting solar solutions driven by cost savings and environmental, social, and governance (ESG) considerations amidst rising electricity tariffs.
Despite recent disruptions in solar panel supply chains due to production halts by Chinese manufacturers across Southeast Asia, Kenanga maintains a relatively stable outlook for average solar module prices in CY24F. This follows a multi-year decline trend, supported by global oversupply despite localised manufacturing setbacks.
Moreover, there is a burgeoning market for Renewable Energy Certificates (RECs) in Malaysia, propelled by corporate commitments under initiatives like RE100. Over 100 local units of multinational companies have pledged to shift to 100% renewable energy, indicating strong future demand for RECs.
Kenanga’s sector top picks, SLVEST and SAMAIDEN, are favoured for their strong market positions, execution capabilities, and robust order pipelines. SLVEST, particularly noted for its PV system financing programme and diversified revenue streams, offers competitive RECs at USD5-6/MW, underscoring its strategic advantage in the evolving RE landscape.
Kenanga reiterates its OVERWEIGHT rating on Malaysia’s RE sector, driven by favourable government policies, substantial contract opportunities, and growing corporate demand for renewable energy solutions. Investors looking to capitalise on the burgeoning solar energy market may find compelling opportunities in PV system EPCC contractors with strong execution capabilities and forward-looking business models.
