Northern Solar Holdings’ IPO Oversubscribed by 73.2 Times, Poised for Strong Growth Post-Listing
ACE Market-bound Northern Solar Holdings Bhd has received overwhelming demand for its initial public offering (IPO), with the public portion being oversubscribed by a staggering 73.2 times.
The solar renewable energy company revealed in a statement today that it received 25,772 applications for 1.47 billion shares, valued at RM924.59 million, against the 67.3 million shares made available for public subscription.
Public Subscription Breakdown
Northern Solar disclosed that the Bumiputera public portion of shares witnessed an oversubscription rate of 62.5 times, receiving 11,865 applications for 628.04 million new shares.
Meanwhile, the non-Bumiputera public portion saw an even higher oversubscription rate of 83.89 times, with 13,907 applications submitted for 839.56 million new shares.
Additionally, the IPO included a pink form allocation of 7.9 million shares designated for eligible directors, employees, and contributors to the company, which was fully subscribed.
IPO Fund Utilization and Expansion Plans
Northern Solar Managing Director Lew Shoong Kai stated that with the IPO funds secured, the company is well-positioned to execute its expansion plans and capitalize on the growing demand for solar renewable energy in Malaysia.
“It will also support our geographical expansion in the northern and southern regions, particularly in Penang, Perak, Kedah, Perlis, and Sabah, along with expanding our existing Johor office,” Lew added.
As part of its IPO, Northern Solar will be issuing 67.3 million new shares at RM0.63 each, targeting to raise RM42.4 million. Concurrently, existing shareholders will offload 35.6 million shares via private placement.
The company is expected to debut on the ACE Market of Bursa Malaysia on February 6, 2025, with an enlarged share capital of 395.6 million shares and a projected market capitalization of RM249.2 million.
PublicInvest Research: Strong Profit Margins & Promising Outlook
In an equity research report, PublicInvest Research highlighted Northern Solar’s superior profit margins compared to industry peers and assigned a fair value of RM1 per share, significantly higher than the IPO price of RM0.63.
The research house noted that Northern Solar has consistently delivered net profit margins ranging from 13% to 19%, well above its industry peers, who typically register margins of 2% to 8%.
“The group is expected to continue to achieve above-average margins, benefitting from lower global solar-panel prices and a focus on high-margin commercial, industrial, and residential solar installations,” PublicInvest stated.
Business Strategy and Order Book Strength
A spokesperson for Northern Solar elaborated that its higher-than-average profit margin stems from its strategic focus on high-margin projects, particularly solar panel installations under schemes such as:
- Net Energy Metering (NEM)
- Self-Consumption (SelCo) schemes
Instead of pursuing large-scale solar (LSS) projects, which offer higher revenue but lower margins, the company deliberately avoids LSS tenders at this stage.
Currently, Northern Solar holds a confirmed order book of RM83.2 million, sufficient to sustain operations for the next 12 months. The company also maintains a robust tender book of RM1.8 billion, underscoring its strong pipeline of potential projects.
IPO Valuation and Growth Projections
PublicInvest Research applied a Price-to-Earnings Ratio (PER) of 26 times to its forecasted FY2026 core earnings per share (EPS) of 3.9 sen, leading to its fair value of RM1 per share.
For context:
- The IPO price of RM0.63 translates to a historical PER of 24.2 times, based on its FY2024 EPS of 2.6 sen.
- Northern Solar recorded a net profit of RM10.09 million in FY2024 on revenue of RM77.97 million.
The company has demonstrated impressive financial performance, with a compounded annual net profit growth rate (CAGR) of 80.2% over the past three years, indicating strong earnings momentum heading into its listing.
Conclusion: A Bright Future for Northern Solar Holdings
With an oversubscribed IPO, robust profit margins, and a strong growth trajectory, Northern Solar Holdings Bhd is well-poised for a successful listing on Bursa Malaysia’s ACE Market.
The company’s strategic focus on high-margin solar installations, alongside its expanding order book and tender pipeline, positions it as a key player in Malaysia’s renewable energy sector.
Backed by PublicInvest Research’s fair value of RM1 per share, investors are keenly watching for potential upside post-listing, making Northern Solar one of the most anticipated IPOs in the renewable energy space this year.
Northern Solar Holdings is set to make its ACE Market debut on February 6, 2025.
Northern Solar Holdings Berhad IPO: A Comprehensive Analysis
Introduction to Northern Solar Holdings Berhad
Northern Solar Holdings Berhad, a prominent player in Malaysia’s renewable energy sector, is preparing for its Initial Public Offering (IPO). Incorporated on 9 January 2024 and converted to a public limited company on 20 March 2024, the company operates as an investment holding entity. Through its subsidiaries, Northern Solar specializes in the Engineering, Procurement, Construction, and Commissioning (EPCC) of solar photovoltaic (PV) systems, the generation of renewable energy, and operations and maintenance (O&M) of solar PV equipment and systems.
IPO Statistics
The IPO involves a public issue of up to 67.252 million new ordinary shares, priced at RM0.63 per share. The breakdown is as follows:
- 19.8 million shares for the Malaysian public
- 7.9 million shares for eligible directors, employees, and contributors
- 39.56 million shares via private placement to bumiputra investors approved by MITI
Additionally, 35.6 million existing shares will be offered via private placement to selected investors. Post-IPO, Northern Solar’s market capitalization is expected to reach RM299 million, with a historical PE ratio of 24.7x (FY24 adjusted EPS based on an enlarged issued share capital of 395.6 million shares).
Financial Performance
| Financial Year |
Revenue (RMm) |
Gross Profit (RMm) |
PBT (RMm) |
PAT (RMm) |
Gross Profit Margin (%) |
PBT Margin (%) |
PAT Margin (%) |
| FY22 |
22.2 |
5.1 |
3.4 |
3.1 |
22.7 |
15.0 |
14.0 |
| FY23 |
44.7 |
11.3 |
7.5 |
6.1 |
25.3 |
16.0 |
13.7 |
| FY24 |
78.0 |
21.6 |
13.3 |
10.1 |
27.7 |
16.3 |
12.9 |
| FPE Sep 25 |
40.2 |
16.0 |
10.2 |
7.4 |
39.8 |
24.5 |
18.5 |
Notably, Northern Solar has demonstrated consistent revenue growth, with improvements in gross profit margin and profitability over the years.
Competitive Strengths
Northern Solar boasts several competitive advantages:
- Proven expertise in customized solar PV solutions, tailored to optimize energy costs for customers.
- A strong track record as a Grade 7 contractor under CIDB, capable of undertaking projects of unlimited size and value.
- Commitment to quality through robust operational controls and compliance mechanisms.
- Experienced executive directors and senior management with diverse expertise in engineering, operations, sales, marketing, and finance.
- Collaborations with notable business partners such as Lagenda Properties and Engtex Group Berhad, offering additional opportunities for EPCC projects.
Business Strategies
To capitalize on growing demand, Northern Solar has outlined several strategic initiatives:
- Relocation to a new corporate office with an engineering knowledge center, enhancing operational efficiency and corporate image.
- Expansion into Johor and Melaka to strengthen market presence in the southern region and capture new business opportunities.
- Geographical expansion to the northern region of Peninsular Malaysia, targeting states like Pulau Pinang, Perak, Kedah, and Perlis.
- Development of a portfolio of solar PV assets to generate recurring revenue by selling electricity to NEM and SELCO consumers.
- Efforts to increase market share within Malaysia’s solar PV industry.
Key Risks
Investors should be aware of the following potential risks:
- Project-based revenue may lead to inconsistent financial performance.
- Delays or inability to complete projects could impact profitability.
- Risks of defects liability claims due to defective workmanship.
- Dependence on timely supply of solar equipment and components at acceptable prices and quality.
- Need for compliance with regulatory approvals, permits, and licenses, with potential penalties for non-compliance.
- Reliance on the skills and efforts of key senior management and employees for sustained success.
Dividend Policy
While Northern Solar does not currently have a formal dividend policy, the company intends to pay dividends in the future. Such payments will depend on financial performance, capital expenditure requirements, and other considerations deemed relevant by the board.
Use of Proceeds
The IPO is expected to generate gross proceeds of RM42.4 million, which will be allocated as follows:
- Working Capital: RM29.2 million (68.8%) within 24 months
- Repayment of Bank Borrowings: RM5.5 million (13.0%) within 12 months
- Business Expansion: RM3.2 million (7.4%) within 24 months
- Estimated Listing Expenses: RM4.6 million (10.8%) within 1 month
Conclusion
Northern Solar Holdings Berhad’s IPO offers a compelling opportunity to invest in Malaysia’s growing renewable energy sector. With a strong track record, innovative strategies, and a focus on expansion, the company is well-positioned for future growth. However, potential investors should weigh the associated risks carefully. The lack of a formal dividend policy may also influence investment decisions. Overall, Northern Solar’s commitment to quality and strategic initiatives provides a solid foundation for long-term success.
