KUALA LUMPUR, Dec 4 (Bernama) -- Bursa Malaysia rallied to close broadly higher on Wednesday amid strong buying interests mainly in utility and technology stocks, with the benchmark index gaining 0.44 per cent. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 7.13 points to 1,614.09 from Tuesday’s close of 1,606.96. The index opened marginally higher at 1,606.97 and moved between 1,606.53 and 1,616.03 throughout the day. Advancers thumped decliners 727 to 381 on the broader market, with 522 counters unchanged, 781 untraded and 10 suspended. Turnover advanced to 3.60 billion units valued at RM3.30 billion versus 3.32 billion units valued at RM3.30 billion on Tuesday.
The solar photovoltaic (PV) sector in Malaysia shows strong long-term potential despite subdued recent earnings. Analysts remain confident about the industry's outlook, driven by government initiatives, an expanding order book, and growing adoption of renewable energy.
Key Highlights
Earnings Snapshot
Solarvest Holdings Bhd (KL:SLVEST):
- 2QFY2025 net profit rose 28% to RM9.2 million, compared to RM7.2 million a year ago.
- First-half earnings reached RM17 million, aligning with expectations of RM41 million full-year profit.
- Order book surged from RM469 million to RM961 million, suggesting stronger performance in the second half.
Samaiden Group Bhd (KL:SAMAIDEN):
- 1QFY2025 net profit increased 12.7% to RM3.34 million, compared to RM2.96 million a year ago.
- Order book rose from RM315 million to RM521 million, positioning it for growth in 2HFY2025.
Challenges for Others:
- Sunview Group Bhd struggled to convert contracts into revenue, while Reservoir Link Energy Bhd reported a RM29.8 million revenue drop in its renewable energy segment.
Industry Dynamics
Growth Drivers
Government Support:
- Programmes like LSS (Large Scale Solar), Net Energy Metering (NEM), and the upcoming LSS5 quota are fueling growth.
- The Corporate Green Power Programme (CGPP) provides tight completion deadlines, boosting activity for solar EPCC players.
Adoption Trends:
- Increasing residential and corporate demand for solar installations.
Cost Benefits from Oversupply:
- Global oversupply of solar panels (manufacturing capacity exceeds installation demand) prevents price hikes, benefiting companies and consumers.
Valuations
- Solarvest and Samaiden are trading at forward PERs of 24.24 and 22.31, reflecting investor confidence in their growth potential.
- Companies like Uzma Bhd and Reservoir Link, with primary exposure to oil and gas, face lower valuations despite some solar industry involvement.
Analyst Insights
Positive Outlook for 2H2025
- Analysts, including Edwin Woo of Hong Leong Investment Bank Research, expect stronger earnings in the second half of FY2025, driven by replenished order books and project deliveries.
Key Strategies for Profitability
- Being both an EPCC contractor and asset owner offers diversified revenue streams:
- EPCC Contractors: Earn from construction and implementation.
- Asset Owners: Generate recurring income from solar asset operations.
Market Imbalances
- The oversupply of solar panels is expected to persist for another year or two, keeping costs low and supporting installation growth.
Challenges
- Revenue Conversion: Companies must overcome delays in converting contracts to revenue.
- Market Risks: Oversupply pressures panel producers, many of whom are operating at losses.
- Earnings Transparency: Lack of segmental breakdowns in financial reports makes it difficult to assess profitability by segment.
Investor Takeaway
- Bright Prospects: Solarvest and Samaiden’s expanding order books and alignment with government programmes position them as sector leaders.
- Valuation Justification: High valuations reflect the growing green energy premium in the market.
- Short-Term Caution: Investors should monitor execution risks, such as revenue conversion and cost management.
With increasing government focus on renewable energy and robust project pipelines, the solar sector offers promising opportunities for long-term investors.
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