KUALA LUMPUR: Results for Reservoir Link Energy Bhd's first half of its fiscal year, which ends on June 30, 2024 (1HFY24), were below Public Investment Bank (PublicInvest) and consensus estimates for the year, which were 18 per cent and 19 per cent of the overall figures for FY24.
The investment bank said the deviation is mainly from a temporary setback in the renewable energy (RE) segment, with regard to replenishing its orderbook due to delays in finalisation of the Corporate Green Power Purchase (CGPP).
"The oil and gas (O&G) segment's orderbook is improving, however, with offshore activity becoming more robust," it said in a note today.
Reservoir Link reported core profit after tax and minority interest (Patami) of RM0.9 million in the second quarter ended Dec 31, 2023 (2QFY24), lower than RM1.0 million in 1QFY24.
This is due to lower revenue recorded for the quarter (-34 per cent quarter-on-quarter), mainly due to lower revenue from its RE segment.
On a year-on-year (YoY) basis, core Patami improved slightly from RM0.8 million, rising by 7.4 per cent YoY, in line with the increase in revenue, which grew by 37.7 per cent YoY.
PublicInvest has cut its earnings forecast for Reservoir Link by 31 per cent, 40 per cent, and 34 per cent for FY24, FY25, and FY26 forecasts, respectively, mainly from lower project execution and margin in the RE segment amid competitive environments.
The investment bank also downgraded its call to "neutral" with a lower sum-of-parts (SOP) valuation target price of RM0.31 from RM0.38 previously.
Meanwhile, Reservoir Link has also indicated that its RM34.3 million wastewater treatment plant (WTP) concession with PT Unilever Olechemical in Indonesia will achieve a commercial operation date (COD) soon after it completes the construction works in February 2024.
PublicInvest said this will contribute a steady recurring income of RM1 million per year to the company's profit before tax for the next 10 years until 2034.
"We are positive with this development as it successfully executed the first operational concession assets while pursuing growth in the RE segment," it added.
