Just Being Real: Does This STOCK Really Worth Its Salt?
Title: Just Being Real: Does This STOCK Really Worth Its Salt?
Just recently, Pimpinan Ehsan Berhad (KLSE:PEB) had concluded their Mandatory General Offer (MGO) to purchase the shares from the general public. Interestingly, PEB was only trading at the range of MYR 0.700 prior to the MGO of RM 1.070, which is close to its net cash price. As at 2nd April 2021, only 1,840 shares were accepted by the PACs. Why is that so?
Article for your reference: https://www.theedgemarkets.com/article/pimpinan-ehsan-mgo-concluded-only-1840-shares-accepted
The answer is simple – the minority shareholders are smart enough to know that PEB are worth much more than mere RM 1.070!
From the company’s signing of Heads of Agreement (HoA) with reNIKOLA group of companies, we could roughly have a guestimate on the timeline of the completion for their Reverse Takeover (RTO). Taking a few RTO cases in the past for consideration, the signing and valuation from 3rd party would probably surface in May or June. This is just on time with PEB’s PN 16 restriction – albeit they could extend it on a reasonable basis. And worry not, I have asked a few analyst friends of mine, it would not be delisted.
So, what is this reNIKOLA group of companies is currently doing?
1. Business Background
Basically, PEB is currently having 3 solar photovoltaic plants in operation and 1 more plant in their expansion pipeline. The 3 existing solar photovoltaic plants have a combined capacity of 88 MWp. MWp is different as compared to our household MWac which inverter will adjust the inflow of electricity before entering our house. MWp is a more commonly use way to calculate the ultimate capacity of a solar photovoltaic plant.
By comparison, how big is 88 MWp? It is not that big on an international scale. However, when compared with local listed solar companies, a 88 MWp in existing operation is by far the largest one in the market. However, this is before calculating the potential new projects for CYPARK, which in total will result in 217 MWp by this year.
For solar photovoltaic plant operators, they would receive a payment sum from TNB by selling the electricity generated via their plant to TNB. Despite the rate differs greatly for LSS1 – LSS4, the operational efficiency is much different, and the ultimate yield is not too far off. It is also interesting to take note that the company’s plants are mainly solar photovoltaic plants from LSS1 & LSS2.
2. Expansion Plan
The 3-existing plant for reNIKOLA is attractive, but personally, I think their upcoming expansion plan is much more lucrative. They are planning another 330 MWp solar photovoltaic plant in Bukit Kayu Hitam, where the management expects the plant to commence construction by end of this year or earlier next year.
Again, what is so special about this 330 MWp solar farm?
Traditionally, the company plans to sell the electricity generated by solar farms to TNB as the final offtaker. But now, reNIKOLA targets to sell their electricity to big corporate players who wants to achieve ESG by purchasing green energy. Could they not achieve that by using rooftop solar panels? Yes, but the capacity could only fit 5% - 10% of usage for large corporations, which is inadequate in my opinion for them.
For large corporations, it is always one big factor that affects them to “go green” – costs. We had seen the recent tariffs for LSS4 range between 18 – 23 cents, and this is almost on par with traditionally generated electricity. Hence, I personally predicts a major shift in consumption for green energy in the future when the price gap reduces. This could happen as soon as 2022 – 2023, and coincidentally, the Bukit Kayu Hitam solar farm normally takes 1 – 1.5 years for construction and would commence operation by 2023 (Hopefully)!
3. Special Investment Points
One would imagine a fixed tile of solar panel when we are talking about solar photovoltaic plants. But as we all know, the radiation from the sun does not stay at one same spot forever. Technically, a solar panel only receive radiation by approximately 5 – 7 hours per day depending on the location. So, in order to effectively “capture” the irradiation from the sun, what does solar farm operators need to do?
Had you heard of the term bi-facial? No, we are not talking about your bi-facial ex who acts differently behind your back – but a bi-facial solar panel who could rotate to capture the maximum possible amount of irradiation based on current technologies.
As a matter of fact, reNIKOLA is the first in our country to deploy bi-facial solar panels in their solar farm. It is very likely that the upcoming Bukit Kayu Hitam 330 MWp could deploy this technology too. If so, the actual capacity could go even beyond 330 MWp!
Imagine the combined potential of reNIKOLA – where one of the highest capacity solar photovoltaic operator in Malaysia plus great efficiency, isn’t reNIKOLA great?
Well, that depends on how well you think the renewable energy sector could go. For me, since Malaysia could not efficiently operate wind turbine as a source of renewable energy, the remaining economical choices are hydropower, biomass, biogas and mini-hydropower farms. Biomass and biogas require a certain constant amount of feedstock in order to keep it in operation, and hydropower is by-far the best source of renewable energy. Of course, its capital deployment is high when one of the turbines breaks down, it would be much more costly to repair.
Hence, we are left with a more decent choice of solar photovoltaic farm. Our country strives to achieve 20% renewable energy as a whole by 2025, and I believe solar farm is one of the best options there is in the market. Interestingly, the management had also target to achieve 1 GWp by 2025, but since they have no concrete material to study, let’s not jump too far away from our conclusion.
In my humble opinion, reNIKOLA is definitely a valuable gem in the renewable market. But still, we would need to carefully evaluate the company’s final RTO value by PEB, as there will be a dilutive effect on the share price. Remember – we are buying PEB’s shares and not reNIKOLA directly.
But that being said, I think the current price is fairly valuing the company (Just my hunch, no actual number for you to crunch since no details had been published yet). Once the final valuation confirmed, there might be another spike in share price based on “Malaysian Investment Style”! I would not recommend you to buy or sell, but do keep a close eye on this company as it is truly an interesting example we could all refer to for any future similar cases.