Northern Solar Holdings Berhad Launches IPO, Subscription Opens on 18th December 2024

Northern Solar Holdings Berhad, a company based in Malaysia, specializes in the engineering, procurement, construction, and commissioning (EPCC) of solar photovoltaic (PV) systems. It also generates renewable energy and provides Operation and Maintenance (O&M) services for solar PV equipment and systems. Its subsidiary, Northern Solar, is registered as a Grade 7 contractor with the Construction Industry Development Board (CIDB), which qualifies it to undertake projects of any scale and value within Malaysia.

Northern Solar Holdings serves a diverse range of clients, including commercial and industrial enterprises, as well as residential customers, offering customized solar energy solutions to meet their specific needs. As of November 19, 2024, Northern Solar was managing 17 solar PV systems under its Group and 4 solar PV systems under Engtex Energy, which generate and sell electricity to Net Energy Metering (NEM) and Self-Generation with Net Energy Metering (SELCO) consumers in Peninsular Malaysia.

The company’s business model is as follows:

Northern Solar Holdings Berhad is expected to raise RM42.4 million from its IPO. The funds are planned to be utilized as follows:

1. Working Capital: RM29.2 million (68.8%) is allocated to enhance operations, particularly in expanding the solar PV systems business and increasing market share in the solar PV industry in Malaysia.

2. Repayment of Bank Borrowings: RM5.5 million (13.0%) is designated for repaying outstanding loans, which will strengthen the financial position for future projects.

3. Business Expansion: RM3.2 million (7.4%) is to be invested in expanding presence in Johor and Pulau Pinang, including the establishment of a new corporate office and an engineering knowledge centre.

4. Estimated Listing Expenses: RM4.6 million (10.8%) is set aside to cover the costs associated with the listing on the ACE Market, including professional fees and commissions.

Northern Solar Holdings Berhad, as depicted in the provided prospectus, exhibits a robust financial profile underpinned by significant growth in revenue and a strategic focus on the engineering, procurement, construction, and commissioning (EPCC) of solar photovoltaic (PV) systems.

The company's financial performance from the financial year ended (FYE) 2022 to FYE 2024, and the financial period ending (FPE) 2025, demonstrates a consistent upward trajectory, with revenue increasing from RM22.2 million in FYE 2022 to RM77.9 million in FYE 2024, and further to RM40.2 million in FPE 2025. This growth is attributed to the company's ability to secure new EPCC projects and its increasing footprint in the renewable energy sector.

The company's gross profit (GP) has also seen a substantial increase, rising from RM5.1 million in FYE 2022 to RM21.6 million in FYE 2024, underlining the efficiency of its operations and the profitability of its projects. The GP margin has fluctuated but remained strong, hovering between 22.7% and 39.8% during the periods reviewed. Administrative expenses have increased in tandem with the company's expansion, reflecting investments in staff, marketing, and project management to support the growing business operations.

Northern Solar Holdings Berhad is a company that works in the solar photovoltaic (PV) industry in Malaysia, which is a part of the bigger renewable energy sector. This industry is all about creating, buying, setting up, and taking care of solar panels that turn sunlight into electricity.

Because Malaysia is close to the equator, it gets a lot of sunlight, which makes solar energy a good choice instead of the traditional fuels like coal and oil. The government is helping the solar PV industry by offering different plans and incentives, such as the Net Energy Metering (NEM) program, Self-Generation with Net Energy Metering (SELCO), and the Large Scale Solar (LSS) program.

According to the most recent data, the amount of power that can be produced by solar PV systems and large-scale solar facilities in Malaysia has been growing really fast. It grew by 29.3% every year, from 894 MW in 2019 to 1,933 MW in 2022. This shows that the solar energy industry in Malaysia is getting bigger and is expected to keep growing because the government is promoting renewable energy, and more homes and businesses are starting to use solar PV systems.

Public issue of 67,252,000 new ordinary shares in Northern Solar Holdings Berhad ("Shares") in the following manner:

- 19,780,000 new shares available for application by the Malaysian public;

- 7,912,000 new shares available for application by our eligible directors, employees and persons who have contributed to the success of our group; and

- 39,560,000 new shares by way of private placement to selected investors;

Offer for sale of 35,604,000 existing shares by way of private placement in the following manner:

- 9,890,000 existing shares to Bumiputera investors approved by the Ministry of Investment, Trade and Industry (MITI);

- 25,714,000 existing shares to selected investors.

1. Strategic Location and Solar Potential: Northern Solar Holdings Berhad benefits from Malaysia's strategic location near the equator, which provides high solar irradiance, making solar energy a viable alternative to fossil fuels.

2. Government Support and Incentives: The company operates in an environment where the government actively supports the solar PV industry through policies like the Net Energy Metering (NEM) program, Self-Generation with Net Energy Metering (SELCO), and the Large Scale Solar (LSS) program, offering incentives that foster growth.

3. Experienced Management and Technical Expertise: The company's management team has extensive experience in engineering and the solar PV industry, enabling it to provide customized solutions and execute projects effectively.

4. Track Record and Market Presence: With a proven track record and a significant installed capacity of solar PV systems, Northern Solar Holdings Berhad has established itself as a notable player in the Malaysian solar PV market.

5. Diversification of Services: The company offers a range of services from EPCC of solar PV systems to operations and maintenance, allowing it to generate revenue from various segments of the solar energy value chain.

1. Dependency on Government Policies: The solar PV industry's growth heavily relies on government policies and incentives, which can change and impact the company's operations and profitability.

2. Competitive Market: The industry is competitive, with many players vying for a share of the market, which could lead to price pressures and affect margins.

3. Technological Obsolescence: The rapid evolution of solar technology poses a risk of obsolescence for companies that cannot keep pace with technological advancements.

4. Weather-Dependent Operations: Solar energy generation is dependent on sunlight, which is variable and can be affected by weather conditions, potentially impacting energy output.

5. High Initial Investment: The high upfront costs associated with solar PV projects may deter some customers, despite the long-term savings.

6. Grid Integration Challenges: As solar power becomes more prevalent, integrating it into the existing electricity grid presents technical and logistical challenges.

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