| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading player in the construction sector has reported a significant surge in its financial performance, with its nine-month FY25 core net profit rising 2.7 times year-on-year. This performance was broadly within AmInvestment Bank’s expectations, representing 58% of their full-year estimate, indicating a robust second half of FY25. The strong 2H25 is projected to account for 70% of the full-year earnings, underscoring a positive operational shift.
Performance Review and Margin Recovery
The notable rebound in earnings is primarily attributed to the tapering of lower-margin KLCC-centric projects. As these contracts concluded and new, higher-margin projects commenced, the company’s operational margins saw a significant improvement, climbing to 7% in 3QFY25 from an average of 5% in 1H25. Quarter-on-quarter, revenue more than doubled, and earnings were propelled by an impressive 109%, driven by the recognition of two new key projects totaling RM18 million, contributing significantly to the strong third-quarter performance.
Future Outlook and Strategic Positioning
The company anticipates a stronger 4QFY25, bolstered by accelerating project momentum. Its order book has reached a record-high of RM710 million, an increase from RM640 million in 2QFY25, ensuring strong earnings visibility for the next two to three years. In 3QFY25 alone, the firm secured RM195 million in new project wins across five major contracts, including significant 132kV underground and 33kV submarine cable installations, as well as multiple 11kV cable installation packages. This translates to a 10% tender success rate from its RM2 billion tender book and an 11% uplift in its overall order book. Furthermore, an improved net cash position of RM22 million, following a recent equity placement, significantly enhances its capacity to undertake larger contracts and reinforces its shift towards a main contractor role.
Investment Perspective
AmInvestment Bank maintains a BUY recommendation, valuing the stock at a target price of RM1.00 per share. This valuation is based on a 16x FY27F P/E multiple, reflecting the company’s superior forward earnings growth rate of 79% and structural tailwinds, including a significant RM35 billion grid capex from TNB and a robust order book. The firm’s strong balance sheet and ongoing margin recovery are key factors supporting the positive outlook.
