Renewables shine ahead

MOMENTUM in the country’s renewable energy (RE) sector is set to carry into 2026, supported by a robust project pipeline and the steady execution of recently awarded projects.

Much of this optimism has already been reflected in RE-related share prices following a strong run-up in 2024 to 2025.

Take the case of Solarvest Holdings Bhd, one of the bigger players in the engineering, procurement, construction, and commissioning (EPCC) market.

The stock is trading at a price-earnings multiple of 35.68 times, reflecting expectations of sustained earnings growth backed by a growing order book.

Fresh from securing additional large-scale solar 5 (LSS5) contracts this week, the group’s year-to-date order book has reached RM1.3bil, already covering half of Maybank Investment Bank Research’s financial year 2026 (FY26) replenishment estimate of RM2.5bil.

Another RM1bil to RM1.2bil is expected to be added by end FY26 once the EPCC contract for its 20% owned 470 megawatt (MW) LSS5+ project in Perak is finalised.

Solarvest is the EPCC contractor for Malakoff Corp Bhd, the developer of the LSS5+ project awarded in September this year.

Similarly, Samaiden Group Bhd, which is trading at 26.64 times PE, is heading into 2026 with strong growth visibility.

This is underpinned by its ambition to grow its order book to RM1bil by the first half of 2026, driven by potential wins from LSS5+ and the rollout of solar projects in Sarawak.

Most research firms maintain a “buy” rating on both stocks, according to Bloomberg data.

At the state-level, Sarawak awarded three 100MW solar projects, drawing interest from major RE players from the peninsula, with more projects reportedly in the pipeline.

Meanwhile, Johor is spearheading a large-scale RE corridor valued at around US$6bil – one of the most ambitious such initiatives in the region.

Together, these initiatives, alongside the Energy Commission’s (EC) national programmes, have broadened the flow of RE jobs and reinforced sector visibility into 2026.

“We expect the RE theme to continue into 2026, with projects such as LSS5, LSS5+ and the Corporate Renewable Energy Supply Scheme (CRESS) moving into the EPCC execution phase,” Areca Capital Sdn Bhd chief executive officer Danny Wong Teck Meng tells StarBiz 7. “That said, earnings delivery will be crucial to justify and sustain the high valuations of some stocks.”

Wong says that while the RE sector represents a structural, multi-year growth story, near-term earnings expectations need to remain realistic.

Against this backdrop, Areca Capital’s fund management team favours higher-quality RE players with proven execution capabilities, reasonable valuations and more sustainable growth profiles, he adds.

Looking into 2026, several catalysts are expected to come into play. One is the EC’s inaugural battery energy storage system (Bess) tender, dubbed MyBEST, which is expected to be awarded soon. The programme will deploy four 100MW/400 megawatt-hour battery assets installed to store solar-generated power and release it to the grid during peak demand periods.

Industry players will be watching closely as the awards are expected to set key benchmarks for pricing and bankability of grid-scale battery storage in the country.

Rooftop solar is also set for a boost. From January, the Solar Accelerated Transition Action Programme or Solar Atap will take over from the Net Energy Metering (NEM) scheme, which ended in June, for domestic and non-domestic consumers.

The hybrid scheme, combining NEM and self-consumption (SelCo), aims to speed up rooftop solar adoption through larger installations, market-based offsets, and simplified registration.

In 2026, the LSS6 programme is slated to open for bidding, potentially adding another 2GW with mandatory Bess integration. Combined with LSS5 and LSS5+, this could bring the total LSS pipeline to around 6GW.

Adding to the momentum, Budget 2026 proposed an extra 300MW Feed-in-Tariff quota for biogas, biomass, and mini-hydro projects, creating new opportunities for developers and contractors. However, financing will be a key enabler.

According to Wong, smaller or newer RE players could face constraints due to the large ticket sizes of projects like LSS6 and banks’ credit limits.

“For CRESS projects, financing is generally available, depending on off-takers’ financial strength.

“As larger players consolidate assets, green bonds or sukuk issuance becomes increasingly attractive, with long-term investors more willing to fund projects that have regulated or contracted cash flows, especially when revenues are supported by corporate offtake or government backing,” he adds.

MBSB Research senior analyst Royce Tan says investors will have their eyes on two things: earnings visibility and actual earnings delivery, watching closely for timely completion, margin discipline and conversion of contracts into profits.

And as more renewable capacity comes online, he sees the investment narrative shifting from a single-pillar energy transition to managing the full energy trilemma of balancing sustainability, affordability and system reliability.

“Renewables, particularly solar, will continue to dominate capacity additions, but the sheer scale coming online underscores the need for financing and system efficiency as enablers

“The question is no longer how much RE can be added, but how efficiently the system can be run as RE penetration rises,” Tan tells StarBiz 7.

Driving this urgency is the country’s growing energy demand: peak electricity hit a record 21.05GW on May 28, 2025.

Looking ahead, demand is expected to remain robust in 2026, with a projected increase of 5.4%, supported mainly by the commercial sector and the commissioning of new data centres, Tan adds.

Notably, a recent report highlighted that Malaysia’s reserve margin, the buffer of spare electricity capacity over peak demand, fell to 29% in 2024, dipping below 30% for the first time since 2016.

A reserve margin under 30% signals tighter capacity, meaning the system has less leeway to meet sudden surges in electricity demand. Coming to the bottomline, maintaining healthy margins will be crucial for RE players as project scale and complexity rise.

Based on MBSB’s channel checks, solar module prices have risen about 10% over the past two months, though Tan believes the impact remains minimal for local EPCC players, depending on the nature of the contracts.

“Most contracts are on a cost-plus basis, allowing them to pass on the higher costs to clients.

“Even in cases where projects are lump sum contracts, the impact is still minimal as the price increase was partially offset by the strengthening ringgit.”

Module cost is about one-fifth of a project’s cost. Analysts expect internal rates of return for LSS5 and LSS5+ projects, targeted for commercial operation in 2027 to 2028, to be in the 7% to 8% range.

Areca’s Wong notes that, based on industry feedback, the LSS5 and LSS5+ schedules are manageable and on track.

While rising solar panel prices could affect future margins, he believes industry players are now better positioned, drawing lessons from the 2021 to 2022 polysilicon price surge and benefitting from improved cost discipline and procurement strategies.

A couple of RE-related initial public offerings (IPOs) came to Bursa Malaysia in 2025, and at least two more are expected in 2026.

“Earlier this year, the stock exchange introduced a RE subsector, providing a more supportive framework for RE-related IPOs by improving peer comparison, benchmarking, and helping companies access funding more efficiently.

“With RE names no longer scarce on Bursa Malaysia, investors will need to pick their stocks carefully,” reminds Wong.