AmInvest sees rapid potential growth in KPower

By HARIZAH KAMEL / source:

KUMPULAN Powernet Bhd (KPower) is projected to have substantial earnings growth for the financial years 2021 (FY21) and 2022 forecast (FY22F) amid a global drive towards renewable energy (RE).

AmInvestment Bank Bhd (AmInvest) has maintained its ‘Buy’ call and forecasts for the group, keeping its fair value at RM5.97 per share for KPower based on 15 times FY22F earnings per share.

The discount is at an average for-ward 20 times private equity of leading RE players globally to reflect KPower being a relatively new player in this space and its relatively small market value.

“On the flip side, from a relatively low base, the growth potential of KPower’s earnings is tremendous at more than 100% and more than 40% in FY21 and FY22F respectively, based on our projections,” AmInvest analyst Jeremie Yap stated in a report yesterday.

Yap stated that KPower could emerge as the winner for the 1GW fourth cycle large-scale solar (LSS4) project due to be announced before the end of the year.

KPower participated in the tender for 50MW, which could also involve asset ownership, in addition to engineering, procurement, construction and commissioning (EPCC) packages.

“We believe KPower is giving Samaiden Group Bhd, Solarvest Holdings Bhd, Cypark Resources Bhd and Mega First Corp Bhd a run for their money, a handful of listed companies that have proven capability and track record in carrying out EPCC solar projects.

“We gather there is a possibility that new entrants could also emerge winners for the LSS4 work packages. If this happens, KPower may reach out to them to set up a joint venture (JV) to carry out the work packages. KPower could be targeting another 50MW-100MW under this JV model,” Yap stated.

KPower reiterated its guidance for RM2 billion job wins in FY21F against AmInvest’s more conservative assumption of RM1.4 billion annually in FY21-FY23F.

Year-to-date in FY21F, KPower has secured new jobs worth RM247.3 million. At present, its out-standing construction orderbook stands at RM1.3 billion.

KPower has identified solar EPCC as one of its key growth areas partly due to the generally low executive risk for solar EPCC projects.

It clarified that it is still in talks with Taiwan-based Global Micro-Grid Technologies Ltd with regard to a RM432 million solar project in Taiwan, as against news reports suggesting that it has won the project.

At about 12 times FY21 earnings, AmInvest believes homegrown KPower has a compelling investment case given its involvement in the green sector where the growth trajectory is just beginning.