Newly-listed Elridge Energy all fired up to go even higher

Elridge Energy Holdings Bhd price saw a sharp rally before peaking in early December 2024. The bullish sentiments probably stem from a recent deal to supply biomass feedstock to a Japanese trading company for 15 years.

The newly-listed manufacturer of biomass fuel products signed a memorandum of understanding with JFE Shoji Group to supply the Japanese company 150,000 tonnes of Green Gold Label certified palm kernel shells annually, from April 2025 until March 2040.

The company said the long-term MOU showed the growing demand for certified biomass fuel, especially Japan, which is highly committed to addressing climate change.

JFE Shoji selected to form a long-term strategic partnership with Elridge Energy based on factors including reliability, cost efficiency, capacity and trust-worthiness.

Biomass fuel products, such as palm kernel shells and wood pellets, can be used for electricity generation in power plants and as fuel in industrial boilers in various types of manufacturing-related industries.

The counter fared pretty well, surging 38% to close at 40 sen the end of its first day of listing on Bursa Malaysia’s ACE Market.

The stock opened at 34 sen versus its initial public offering price (IPO) of 29 sen per share and climbed to as high as 40.5 sen.

At the closing price, Elridge has a market capitalisation of RM800 million and valued at about 33 times its trailing earnings based on earnings per share of 1.2 sen for the financial year ended Dec 31, 2023 (FY2023).

Elridge mainly manufactures and trades biomass fuel products, particularly palm kernel shells and wood pellets, used to generate heat or electricity.

Biomass fuel products are energy sources derived from organic materials that are burned or combusted to generate heat or electricity.

Elridge, which is partly backed by listed electrical distribution equipment firm Mikro MSC Bhd, has raised RM101.5 million from its IPO, which was oversubscribed by 28.78 times.

The company has earmarked more than two-thirds of the proceeds raised from the public issue for capital expenditure to expand its production capacity.

Elridge plans to spend 46% of the proceeds for the construction of a new factory and warehouse in Kuantan, which will raise production capacity by 240,000 tonnes.

It has also earmarked 21% of the proceeds to buy equipment for new factories in Kuantan, as well as in Johor and Sabah.

The company currently operates out of a Port Klang factory, which has a capacity of 720,000 tonnes per year, but has hit utilisation rate of nearly 74% by end-2023.

With a solid long term supply contract in hand backed with capacity expansion plans, things should look positive for Elridge moving forward.