CGS-CIMB positive on Taliworks’ solar assets acquisition


CGS-CIMB Securities Sdn Bhd retained a ‘Add’ rating on Taliworks Corp Bhd but with a higher target price of RM1.15 following the acquisition of four solar projects worth RM144 million and its move into the renewable energy (RE) business.

The broker’s analyst Sharizan Rosely noted that the four solar projects have a combined power generating capacity of 19 megawatts (MW) and located within the vicinity of Kuala Lumpur International Airport.

Each solar project has 13 years remaining on a 21-year RE power purchase agreement (REPPA).

The counterparties are Tenaga Nasional Bhd and Malaysia Airports Holdings Bhd as the two sole offtakers over the life of the PPA.

Sharizan believes the recurring earnings from the solar ventures will enhance Taliworks’ environmental, social and governance visibility.

“This acquisition is earnings-accretive, supported by a base-case combined post-merger and acquisition RE Ebitda of RM22 million (60% to 70% Ebitda margin) at 100% stake,” he wrote in a research note today.

The analyst added that the solar ventures remain viable as revenue scalability is supported by substantially lower cost for new solar panels versus seven years ago, lower capital expenditure cost and output optimisation closer to the declared annual availability of 19MW versus 70% output rate currently. 

He expects Taliworks’ water tender bids to regain momentum in the coming months which could provide more job flow upside following the RM896 million total wins from the Sg Rasau water supply scheme in December 2021. 

“We understand the remaining package tender worth RM2 billion for 700 million litres per day capacity of the Rasau project, for which Taliworks is among the four shortlisted candidates, will be finalised by the second quarter of the calendar year of 2022,” he stated. 

CGS-CIMB raised Taliworks’ financial year of 2022 (FY22) to FY24F earnings per share by 6.2% to 6.5% to factor in the estimated recurring earnings from the solar ventures. 

Taliworks’ shares were last traded at 92 sen a piece, giving it a market capitalisation of RM1.86 billion.