The renewable energy sector is not a new market in Malaysia. Pioneering this sector had players like Cypark, Amprop, while joining the bandwagon had saw company like Fitters and VSolar coming into the picture as well. It is expected that there will be more new player coming into the picture of renewable energy as the market is still full of opportunity in terms of growth and demand.
With PUC joining into the bandwagon, what could be the initiative and counter measure in PUC to propel itself to compete with established player ?
Solar Energy - Same Sector, Different Delivery
When we talked about smartphones, the quickest brand that strike into the consumer mind should be none other than the Apple iPhone and Samsung Galaxy smart phone series. With 2 major established brand in the market, new entry smart phone manufacturer such as OPPO will need to deliver their product in a different manner to the consumer in order to penetrate the market. For this, OPPO positioned it's product with VOOC fast charge which can hold a 2 hour talk time with just 5 minutes of charging.
Now, the next "OPPO" of the solar energy sector could be PUC. How would PUC explore the Solar Energy Sector differently?
A common layman thoughts of the solar energy sector will be starting with the bidding of the quota from SEDA, securing the PPA from Tenaga, building the solar farm and receiving revenue from the FIT program. For PUC Managing Director Mr Cheong Chia Chieh, he would see this in a totally different manner.
Mr Cheong is aiming to build at least 50 MW of capacity in the solar energy. In order to achieve this, PUC had set up a EPCC (Engineering, Procurement, Construction & Commissioning) team which will be able to act as contractor to build the solar farm. The EPCC team will be looking out for individuals who had been allocated with quota, but lacking of technical specialization and finance to build and run the solar farm.
Cheong quipped that if PUC can provide financing of the whole project (Approx RM 8million / 1MW), then PUC can be a truly established solar energy player that can cater to the downstream activities.
Currently, there are easily more than 100MW of quota allocated to individual which are not put into operation because of funding issue. This is a hidden huge market that had been overlook, and PUC will be the pioneer in tackling this hidden market. Instead of waiting for the annual limited allocation by SEDA, PUC can jump into operation once a deal is brokered out with the individual by building and financing the solar farm with the PPA as a collateral.
For Cheong, this is a win-win situation for both parties.
According to close sources, PUC had at least negotiated 35 MW in the waiting list, and that is translatable to a recurring revenue of RM 35 million per year. Sources informed that PUC might be seeking another corporate exercise to raise more fund if the demand is great.
Currently, the bigger player in the solar energy sector will be Cypark (8MW) and Amprop (10MW). Should PUC had a total control of revenue from the 35MW capacity from both direct and indirect channel, PUC will be the largest solar farm operator in Malaysia, which would possibly see a rerating towards the company. A 35 MW solar farm is capable of bringing in recurring revenue of RM 35 million per year, translating to 3.2 cents in EPS per year.
At PER x10, revenue from the 35MW solar energy can value the company at 32 cents. At the current price of 8.5 cents, PUC had a huge capital appreciation opportunity of almost 400%.
PUC will be an interested company to be look upon, given their new direction of business which look into securing long recurring steady revenue. The growing opportunity in the solar energy sector, if capitalized in a proper manner will resemble to a major turnaround opportunity for PUC.
PUC will be a great buy based on :
- Providing One-Stop solution in Solar Energy, capitalizing the downstream activities.
- New Business Model of EPCC with Financing to individual can capitalized revenue from solar farm not owned by PUC.
- PUC will undertake a corporate exercise in raising fund, of which at the current price will be attractive to be invested.
- Possible in becoming the largest solar farm operator in Malaysia.
- 35MW readily available, translating to RM 35 million revenue per year, contributing 3.2 cents in EPS, trading at PER x10 translate to a valuation of RM 0.32.
- Current price had saw consolidation at the range of RM 0.085. PUC can trade back into the range of RM 0.10 to RM 0.12 on a strong break out on MA20.
Grow along PUC ? You decide
Bone's short term TP : RM 0.125
Cheers and have a nice day.