| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading investment bank has reported robust half-year results for a key player in the construction sector, with core net profit for the first half of FY26 reaching RM53.5 million. This performance accounted for 41% and 40% of the firm’s and street’s full-year estimates, respectively, aligning with expectations for an even stronger second half. The company’s top-line performance saw significant year-on-year growth, surging 59.2% to RM653.7 million from RM410.5 million in the prior year. Quarter-on-quarter, adjusted net profit improved by 13.0%, propelled primarily by a 54.5% increase in revenue.
Operational Efficiency and Margins
The strong financial performance was largely attributed to accelerated construction activities and improved progress billings from existing projects. Anticipated stronger performance in the second half of FY26 is expected to be underpinned by higher progress billings from high-margin high-rise construction order books, notably from key clients such as Exsim, Maxim, and Platinum Victory, alongside incremental contributions from new orders secured year-to-date.
However, the bottom-line expansion was somewhat tempered by a higher effective tax rate, which rose by 17.2%, and a substantial 474% surge in interest costs. Furthermore, the PAT margin moderated to 8.2% from 10.0% in 1HFY25, primarily due to higher revenue recognition from data centre construction and EPCC contracts, which inherently carry lower profit margins. Despite these pressures, management expects improved construction margins to materialize in 2HFY26 as better-margin high-rise projects contribute more significantly.
Future Outlook and Robust Order Book
The company’s order book remains a significant highlight, with year-to-date new orderbook replenishment amounting to RM1.5 billion. This has elevated the cumulative total outstanding order book to a record-high of RM4.6 billion, providing approximately 3.0 times cover of its FY26 forecasted revenue and ensuring earnings visibility for the next three years.
Management expresses confidence in securing the balance of its targeted RM4.0 billion orderbook replenishment for FY26. This optimism is supported by a substantial pipeline of potential new contracts, with over RM2.0 billion in cumulative main building construction works expected to be awarded from an estimated RM3.3 billion pipeline. The company is also actively pursuing solar EPCC opportunities from the LSS5 programme, potentially worth around RM200 million.
The firm also intends to diversify its orderbook portfolio, moving beyond high-rise residential construction to include more EPCC jobs on green infrastructure, reinforcing its ESG credentials. The company has declared a first interim dividend of 3.0 sen per share for FY26, implying a dividend yield of approximately 1.5%, and reiterated its commitment to a minimum 30% dividend payout policy.
Analyst Reaffirms ‘BUY’ Recommendation
TA SECURITIES maintains its “BUY” recommendation, reiterating an unchanged target price of RM0.25. The positive stance is underpinned by strong and sustained relationships with major clients, strategic positioning as a key beneficiary of the property sector’s growth momentum, and robust earnings visibility and growth prospects supported by an expanding and resilient order book. The last traded price for the company’s shares was RM0.20.
