Locking in ‘green’ earnings stream
? Completion of the RM144m acquisition of four solar projects is a positive
milestone for Taliworks and establishes its position in the RE space.
? We believe the new green recurring earnings from the solar ventures will
enhance the group’s ESG visibility; we raise FY22-24F EPS by 6.2-6.5%.
? Reiterate Add rating with a higher TP of RM1.15 as we impute the estimated
DCF value of the remaining 13 years on a 21-year REPPA.
Acquisition of four solar projects completed
Taliw orks announced at end-Apr the completion of the acquisition of four solar projects
w ith a total acquisition value (enterprise value; EV) of RM144m, to be funded largely by
internal cash (end-Dec 21 cash and investments of RM457m). The four solar projects have
a combined pow er generating capacity of 19MW (located w ithin the vicinity of Kuala
Lumpur International Airport, KLIA), each w ith 13 years remaining on a 21-year Renew able
Energy Pow er Purchase Agreement (REPPA). The counterparties are Tenaga Nasional
and Malaysia Airports, being the tw o sole offtakers over the life of the PPA.
Green recurring income stream for the next 13 years
This acquisition is earnings-accretive, supported by a base-case combined post-M&A RE
EBITDA of c.RM22m (60-70% EBITDA margin) at 100% stake. The solar ventures remain
viable as revenue scalability is supported by: 1) substantially low er cost for new solar
panels vs. 7 years ago, 2) low er capex cost, and 3) output optimisation closer to the
declared annual availability (DAA) of 19MW vs. c.70% output rate currently. Based on an
assumed WACC of 7%, w e arrive at an estimated aggregate DCF value of RM189m for
the remaining 13 years of the REPPAs.
Ramping up water tenders in coming months
On the contract outlook front, w e expect w ater tenders to regain momentum in the coming
months, w hich could provide more job flow upside follow ing the RM896m total w ins from
the Sg. Rasau w ater supply scheme in Dec 21. We understand that the remaining package
1 tender (w orth c.RM2bn, 700 MLD capacity) of the Rasau project, for w hich Taliw orks is
among the four shortlisted candidates, w ill be finalised by 2QCY22; the aw ard is to be
announced by mid-2022 as it is a priority project in the state of Selangor.
FY22-24F EPS raised; Add call intact with higher TP of RM1.15
We raise FY22-24F EPS by 6.2-6.5% as w e factor in the estimated recurring earnings from
the solar ventures. The estimated DCF value of the solar assets at 100% stake lifts our
RNAV-based TP by 8% (+8 sen) to RM1.15, based on an unchanged 10% discount to
RNAV. We retain Add, backed by attractive dividend yields of 6.9% (FY22-24F). Key
catalysts: 1) contract w in from Sg. Rasau and other w ater tenders, and 2) completion of
the solar acquisition deal. Dow nside risks: w eaker earnings. We believe the new green
recurring earnings stream from the solar ventures w ill enhance Taliw orks’s ESG visibility.