KUALA LUMPUR: MIDF Research sees the potential of the engineering, procurement, construction and commissioning (EPCC) sub-sector as a key immediate-term beneficiary of Malaysia's renewable energy (RE) initiative.
The firm said although the announcement by Ministry of Energy Transition and Water Transformation on Monday fell short of mentioning details on supply of RE for the export scheme, local RE plants are expected to enter into power purchase agreements for supply of energy for export, based on details in the latest Cross Border Electricity Sales (CBES) guideline.
For a start, a pilot 100 megawatt (MW) export to Singapore will be auctioned out to interested purchasers that have a generating/retailing license for the republic's electricity market.
"The pilot 100MW export capacity is small but in the longer term, we note that Singapore is looking to import up to 3.5GW of green electricity by 2035," MIDF Research said.
"We view this as a positive development, but news of RE export has been around for a year now, following a mini announcement in March 2023 prior to release of National Energy Transition Roadmap," it added.
As such MIDF Research maintained a "Neutral" call on the sector given its stocks' strong share price performance and stretched valuations.
The firm kept its "Buy" calls on Samaiden Group Bhd with a target price of RM1.62, Pekat Group Bhd with 68 sen target price and Sunview Group Bhd with a target price of 88 sen.
The three companies are seen as the key immediate-term beneficiaries of Malaysia's RE initiatives.
"In the asset owner space, we still like YTL Power (buy target price RM4.22 for a potential earnings recovery at Wessex Water, expansion into data centres and as a potential beneficiary of LSS5 and RE exports," MIDF Research added.
It said the extent to which Tenaga Nasional Bhd (Neutral, target price of RM11.00) benefits from grid upgrade requirement in the mid-term hinges on the approved capital expenditure for Regulatory Period 4 as well as allowable returns which will be determined towards end-2024.