Margins a concern for Sunview despite securing Bintulu contract

KUCHING (March 6): Margin pressure could weigh on Sunview Group Bhd’s profitability despite the group securing a RM289.71 million engineering, procurement, construction and commissioning (EPCC) contract to develop a solar photovoltaic (PV) power plant in Bintulu.

Analysts at MBSB Investment Bank Bhd (MBSB Research) said in a note on Friday that the contract is based on a fixed sum, which may expose the group to margin risks.

“While we are positive on the renewable energy subsector, particularly solar EPCC players that are expected to benefit from various schemes and policies as well as the longer-term National Energy Transition Roadmap (NETR), we believe compressed margins from fixed-sum contracts could weigh on profitability.

“This is considering the recent cancellation of export value-added tax rebates on solar PV products from China, which could lead to higher solar module prices,” it said.

The note followed Sunview’s announcement that its wholly owned subsidiary, Fabulous Sunview Sdn Bhd, had secured the contract from Malakoff Evergreen Sdn Bhd to develop the solar PV power plant at Sungai Likau, Bintulu.

Although Sunview did not disclose the project’s specifications, analysts believes the project involves a 100MW solar PV facility based on earlier reports.

Despite the potential margin pressure, MBSB Research described the contract win as timely for the group, coming shortly after Sunview reported underwhelming quarterly earnings.

It added that the new job is expected to lift the group’s unbilled order book to RM366.2 million.

The research house noted that while Sunview recently proposed to diversify its principal business to include solar power generation, solar EPCC remains the group’s core earnings contributor.

“We expect future replenishment prospects to come from LSS5+, on top of ongoing rooftop solar jobs,” it added.

MBSB Research maintained its ‘sell’ call on Sunview with an unchanged target price of RM0.30, citing continued earnings disappointment.