Solarvest IPO Presentation

16 Nov 2019

Dear Fellow Investor,

Last week I attended an IPO presentation by Solarvest .

According to Inter Pacific research:

SOLARVEST Holdings Bhd stands to potentially benefit from Putrajaya’s aim to grow the entire value chain of the solar photovoltaic (PV) industry. There is a target price of 49 sen on the company based on a valuation of 13 times  price earnings ratio pegged to the financial year 2020.

“The government is committed in supporting the growth of the solar PV industry by setting a target for electricity generated from renewable energy (RE) at 20% of all power produced.

“On top of that, the government provides incentives by way of lower taxes for green technology projects, income tax exemption on green technology services and tax incentives for purchase of green technology assets, all of which reduce the investment payback period,” Interpac said in a research note.

Last month, The Malaysian Reserve reported that Solarvest aims to raise RM34.6 million from its IPO on the ACE Market of Bursa Malaysia, with the money largely for its working capital for daily operations and future projects.

The IPO entails a public issue of 98.83 million new shares with 19.5 million shares available for the public at 35 sen each.

The research house also said Solarvest currently owns a 1MW facility in Kedah and intends to own a large scale  solar PV (LSSPV) plant in the future.

“As an experienced subcontractor for LSSPV and a turnkey engineering, procurement, construction and commissioning (EPCC) contractor for three LSSPV projects in Kampar and Kamunting in Perak for Asia Meranti Group, Solarvest intends to tender for its own account as turnkey contractor in future LSSPV projects,” it said.

Inter-Pacific remains optimistic on the growth of the solar PV industry as the government intends to achieve a total installed solar PV capacity of 5,800MW by 2025.

Independent market research, Protégé forecasts the total solar PV installed capacity in Malaysia to grow from 438MW in 2018 to 3,322MW in 2023, representing a compound annual growth rate of 50%.

Solarvest is slated to be listed on Nov 26, 2019. This would be the 10th ACE Market listing for the year from a total of 23 listings in Bursa Malaysia year-to-date.

M&A Securities Sdn Bhd is the advisor, sponsor, underwriter and placement agent for the IPO exercise.

Solarvest is 45% owned by Main Market-listed Chin Hin Group Bhd. Upon completion of the IPO, Chin Hin’s shareholding will fall to 33.6%.

Solarvest specialises in turnkey EPCC services for solar PV systems. It also provides operations and maintenance services of solar PV systems.

According to the prospectus, the listing expenses are 9 %. That means if you take up the IPO you are down 9 % before you take up the offer.

Although, I like the potential of solar power and the government supporting this sector based on the new budget, I would wait for a few months before acquiring. This share is not suitable for EPF/ investment  accounts.  

The business has a low barrier to entry and there is a lot of competition and I do not like paying a 9 % premium to the sales staff.

Expect window dressing in the markets as we approach the end of 2019. Blue chips, selected Reits,  the banking sector,and  plantations should be supported by the institutions and funds. This applies to the Asian markets we invest in.

Interest rates have stabilized but remain low as world growth is slowing. Focus on high quality established dividend shares to ride out the uncertainty/ low rates especially for your EPF and investment accounts.

Invest well and grow your wealth
Bill

Critter of the week is a 3 legged dog. He lives in an LRT station in Cheras and takes his food from passers by. He is active and healthy  If anyone is interested to give this dog a forever home I can give you more details.