Introduction
Malaysia’s renewable energy sector is on the cusp of significant transformation, driven by the government’s initiatives to expand solar energy capacity and the participation of key industry players. The launch of the Large Scale Solar (LSS) PETRA 5+ program by the Energy Commission marks a strategic step toward achieving the country’s renewable energy targets. This report delves into the performance and prospects of key players in the renewable energy sector, including Solarvest, Cypark Resources, and others, while highlighting investment opportunities and recommendations.
Solarvest Holdings Berhad (SOLAR MK)
Recommendation: Buy
Current Price: MYR1.75
Target Price: MYR2.14
Market Capitalization: USD280 million
Upside Potential: 23%
Key Highlights
Solarvest is positioned as a dominant player in Malaysia’s renewable energy landscape, particularly in the solar energy sector. The company is expected to significantly benefit from the LSS PETRA 5+ program, which offers substantial opportunities in engineering, procurement, construction, and commissioning (EPCC) contracts. With an estimated EPCC cost of MYR3 million per MW, the total potential contract value could reach MYR6 billion.
Growth Drivers
- Solarvest has a robust market share and the largest order book (OB) among its peers, positioning it well to secure contracts under the LSS PETRA 5+ program.
- Forecasted OB replenishment is projected at MYR524 million, MYR779 million, and MYR800 million for FY25, FY26, and FY27, respectively, indicating sustained growth.
- The company’s 50MW LSS4 solar assets and 90MW CGPP solar assets contribute significantly to its valuation, with a combined discounted cash flow (DCF) value of MYR517 million based on long-term power purchase agreements (PPAs).
Valuation
Solarvest’s target price of MYR2.14 is derived using a sum-of-parts valuation, applying a 25x price-to-earnings ratio for its EPCC earnings. The company’s strong growth potential and operational efficiency justify its premium valuation.
Cypark Resources Berhad (CYP MK)
Recommendation: Hold
Current Price: MYR0.84
Target Price: MYR0.87
Market Capitalization: USD153 million
Upside Potential: 4%
Key Highlights
Cypark Resources is another significant player in Malaysia’s renewable energy sector, specializing in EPCC contracts and integrated renewable energy solutions. However, its financial metrics indicate limited upside potential compared to its peers.
Challenges
- The company’s price-to-earnings (P/E) ratio for FY26 is estimated at 24.7x, reflecting a relatively high valuation for its earnings outlook.
- Dividend yields remain negligible, making it less attractive for income-focused investors.
- Cypark’s growth prospects are hindered by its smaller market share and order book compared to leading players like Solarvest.
Key Insights on Malaysia’s Renewable Energy Sector
LSS PETRA 5+ Program Overview
The LSS PETRA 5+ program is a game-changer for Malaysia’s renewable energy sector, offering 2GW of additional solar capacity. The program is divided into two packages:
- Package A: Ground-mounted solar plants totaling 1,500MW, with project sizes ranging from 30MW to 500MW.
- Package B: Floating solar plants totaling 500MW, with project sizes ranging from 10MW to 500MW.
Companies with a minimum 51% local equity ownership can participate in the bidding process, with submissions due by February 28, 2025. The shortlisted bidders will be announced in 3Q25, presenting a lucrative opportunity for industry players to secure high single-digit internal rates of return (IRRs).
Market Opportunities
The program creates significant investment opportunities, with EPCC contracts worth MYR6 billion. Key beneficiaries include Solarvest, Cypark, Sunview, Pekat, and Samaiden, all of which are well-positioned to capitalize on rising demand for renewable energy capacity.
Conclusion
Malaysia’s renewable energy sector is poised for robust growth, driven by government initiatives and the active participation of industry leaders. Solarvest emerges as the top pick due to its dominant market position, strong order book, and attractive valuation. While Cypark offers some upside potential, its growth is relatively constrained. Investors seeking exposure to Malaysia’s renewable energy boom should closely monitor developments in the LSS PETRA 5+ program and consider the recommendations outlined in this report.
