AmInvest: Kumpulan Powernet to prosper on RE demand


KUMPULAN Powernet Bhd (KPower) is set to benefit from the expansion into the renewable energy (RE) space as the sector expands rapidly between 2019 and 2025.

AmInvestment Bank Bhd (AmInvest) has a ‘Buy’ call on KPower with a target price of RM4.16 per share as the dependence of RE is set to increase which would mean well for the company.

“The dependence on RE is projected to rise to 23% from 16%, underpinned by the global trends towards clean and sustainable energy, and carbon neutrality to combat climate change.

“This augurs well for KPower which builds green utilities such as hydro, solar, biomass and power plants,” the investment bank stated in a report yesterday.

Another investment merit for KPower is the group is set to ride the green wave by virtue of its RM1.2 billion order backlog on green utility projects, coupled with a tender book of RM3.2 billion.

“Based on our assumption on job wins of RM1.4 billion annually in financial year 2021 (FY21) to FY23 (which is a tad more conservative than the company’s guidance for RM2 billion annually), a net profit compound annual growth rate of 76% in FY20-FY23 is within reach,” it said.

Similarly, AmInvest added that KPower is a strong contender for engineering, procurement, construction and commissioning (EPCC) packages under the 1GW fourth cycle of the large-scale solar (LSS4) project.

“We understand that KPower has submitted tenders for at least 50MW, and could involve asset ownership in addition to EPCC. At about 12 times forward earnings, we believe this homegrown RE player has a compelling investment case given its involvement in the sector at the right time,” it said.

According to the bank, from a relatively low base, the company’s growth potential on earnings is tremendous at 145.1% and 43.7% in the FY21 and FY22 respectively based on its projections.

The company had undergone a corporate exercise in June 2019, that ushered in new shareholders, management team and business direction.

KPower then turned itself into a builder of green utilities, with a primary focus on the provision of EPCC and project management for RE power plants including hydro, solar, biomass and power plants in South-East Asia, Central Asia, Europe and the Middle East.

KPower posted a 216% year-on-year jump for its fourth-quarter (4Q) net profit, boosted by contribution from its new construction-related activities segment.

The group recorded a net profit of RM7.31 million for 4Q ended June 30, 2020, compared to RM2.31 million a year ago, as revenue more than tripled to RM39.36 million from RM11.95 million, its filing to Bursa showed.

Its shares closed eight sen higher at RM3.48 yesterday, taking its market capitalisation to RM393.5 million.