RAM Ratings raises outlook on Solarvests A1 issue rating to positive

RAM Ratings has raised the outlook on the long-term A1 rating of Solarvest Holdings Berhads (Solarvest or the Group) RM1 bil Islamic Medium-Term Notes/Islamic Commercial Papers Programme to positive from stable. The short-term rating is P1.

The revision is based on expectations that Solarvest will register sustained improvements to its credit metrics, driven by stronger cashflow generation as the Group expands its order book and maintains its market leadership in Malaysias solar engineering, procurement, construction and commissioning (EPCC) market amid bright industry prospects in the medium term. The positive outlook is further supported by projected growth in the Groups business scale, underpinned by healthy earnings accretion, reinvestment and development of owned solar assets.

Solarvests positioning as a provider of solar EPCC and clean energy solutions aligns well with opportunities arising from the Malaysian governments commitment to attaining a 70% share of renewable energy (RE) installed capacity by 2050, as well as the broader expansion of RE markets across the Asia-Pacific region. The current solar energy growth potential overshadows the threat of new entrants and risks posed by the order book-driven nature of Solarvests EPCC business  its primary income contributor. We also see notable progress in the diversification of the Groups income streams towards recurring income sources via its asset ownership segment and other RE solutions.

The Groups total assets and annual revenue are both expected to grow three-fold over the next four years. This exposes Solarvest to scaling risks including a potential overextension of management capabilities and increased financial leverage to fund new business lines and markets that may not perform as anticipated. Management has however displayed commendable execution capability in growing the business at an exponential pace in previo