by HARIZAH KAMEL / pic by TMR FILE
PEKAT Group Bhd’s growth plans are anchored on solar photovoltaic (PV) projects and constructions of new building facilities, supported by larger capital and workforce.
Public Investment Bank Bhd (PublicInvest) noted that the ACE Market-bound solar PV specialist plans to expand working capital and staff to secure and complete more projects, besides constructing new premises with an integrated monitoring, management and assessment platform.
PublicInvest has derived a fair value of 50 sen based on an 18 times price-earnings (PE) multiple to its financial year 2022 forecast (FY22F) earnings per share (EPS) of 2.8 sen. The valuation is at a premium to Pekat Group’s share offer price of 32 sen.
Pekat Group is scheduled for listing on the ACE Market of Bursa Malaysia Securities Sdn Bhd on June 23.
“The IPO is expected to raise RM44.4 million from the issuance of 138.7 million new shares. Besides utilising 40.6% of the proceeds for capital expenditure, 28.6% of the proceeds are allocated for working capital,” the investment bank said in a report yesterday.
Pekat Group has three distinct business areas, namely the design, supply and installation of solar PV facilities; supply and installation of earthing and lightning protection (ELP) systems; and distribution of electrical products and accessories in Malaysia.
PublicInvest stated that the group’s growth is correlated to solar PV and ELP system business expansion, construction of new head office and operational facility, and development of integrated monitoring, management and assessment platform.
It noted that Pekat Group could leverage its competitive strengths such as diverse business activities, synergistic benefits between three main business areas, experience to address different segments of the solar PV market and involvement in government and privately funded projects.
“Key drivers may include favourable government initiatives, financial incentives and tax breaks for the solar PV industry, and rebound in the construction sector, driven by the resumption of activities across all subsectors,” it added.
The downside risks included competition from other service providers, dependency on its third-party manufacturers for its brand products, dependency on its subcontractors and exposure to foreign-exchange fluctuation.
Maybank Investment Bank Bhd (Maybank IB) said Pekat Group’s pricing at 32 sen is at a historical FY20 PE of 15.2 times, in comparison to the Bursa Malaysia Construction Index which trades at a trailing FY20 PE and a prospective 2021 PE of 20.6 times and 14.6 times respectively.
Maybank IB expects Pekat Group to benefit from various solar PV programmes such as the net energy metering programme and large-scale solar PV power plant programme.
The research house noted that the government aims to achieve a 20% renewable energy capacity mix by 2025.
The construction sector is expected to rebound by 13.4% in 2021, after declining 19.4% in 2020, driven by the resumption of activities across all subsectors, according to the Independent Market Research Report.