KUALA LUMPUR: SD Guthrie could benefit from two income streams, namely leasing idle land and revenue from its solar initiatives, although the earnings impact is unlikely to be substantial in the short term.

The company has partnered with Gamuda Bhd under a collaboration agreement to develop, own, and operate solar power projects, including energy storage systems, with a combined target capacity of 1.2 gigawatts (GW).

According to CIMB Securities, the initiative aligns with SD Guthrie's strategy, with renewable energy identified as one of its two new growth drivers.

"The venture offers a sustainable revenue stream while supporting the group's net-zero target. SD Guthrie had earlier outlined its ambition to own up to 1 GW of renewable power assets," it added.

The research house viewed the partnership positively, noting that Gamuda's renewable energy expertise should help address concerns about SD Guthrie's limited experience in developing large-scale solar power projects.

"Assuming a 51:49 stake split, SD Guthrie's 51 per cent share of equity investment in 1.2 GW of solar power assets would be approximately RM367 million, based on a total project cost of RM3.6 billion funded at an 80:20 debt-to-equity ratio," it added.

RHB Research said the assets may take five years or longer to build, but phased development means contributions could begin as early as 2028–2029.

"We understand that, for each solar project, SDG could hold a different stake. Based on our back-of-the-envelope calculation, annual earnings from 1.2 GW of solar projects could range from RM200 million to RM250 million per annum, depending on the tariff.

"These projects will add to SD Guthrie's existing solar project in Kedah, where it will start operating its 15-megawatt Corporate Green Power Programme solar plant in Bukit Selarong in the fourth quarter of 2025," it added.

Both CIMB Securities and RHB maintain a 'Buy' recommendation on SD Guthrie, with CIMB setting a target price of RM5.15 and RHB IB at RM6.10