UUE: Record Orderbook Fuels Strong Earnings Outlook, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.73 (+25.9%) |
| Last Traded | RM0.58 |
| Recommendation |
UUE Holdings is poised for significant earnings momentum in the second half of fiscal year 2026, driven by a record-high orderbook and strategic expansion into key growth markets. This positive outlook is supported by a substantial new subcontract win in Singapore, which has bolstered the company’s prospects.
Performance Review
The company recently secured a Singapore subcontract valued at SGD20.9 million (RM67.3 million) for High-Density Polyethylene (HDPE) pipe installations using horizontal directional drilling (HDD). This latest win, following an earlier SGD8.4 million award, marks UUE’s largest single contract in Singapore to date and has propelled its total orderbook to a new record of RM521.9 million. This achievement underpins management’s optimistic stance, indicating UUE’s strong position to capitalize on spillover opportunities from new capital expenditure cycles by TNB in Malaysia and SP PowerAssets in Singapore, both driven by ongoing infrastructure modernization and increasing energy demand.
Operational Highlights
UUE’s Singapore operations demonstrated a robust recovery, contributing RM5.5 million in the second quarter of fiscal year 2026, a notable increase from RM1.1 million in the preceding quarter. The company has expanded its on-site project teams from two to between eight and ten, signaling increased activity. The new Singapore orderbook, now at RM111.5 million and expected to be completed within two years, represents an average annual recognition of RM55.8 million, more than double the FY25 figure.
Domestic operations in Malaysia remain a primary growth driver, with 2QFY26 domestic revenue experiencing a significant surge of 67.8% quarter-on-quarter and 52.1% year-on-year. UUE has expanded its workforce and subcontractor base across Peninsular Malaysia to support project rollouts. Approximately RM344 million of the total orderbook is derived from TNB-related contracts. The doubling of TNB’s capital expenditure under Regulatory Period 4 (2025-2027) is expected to generate further opportunities in the distribution segment, with timely project delivery potentially unlocking additional upside through variation orders or contract extensions.
The manufacturing segment reported an improved utilization rate of 52.5% in 2QFY26, up from 48.5% in 1QFY26, and peaked at 70% in August 2025 due to customers front-loading orders ahead of the impending SST implementation. While Line 3, dedicated to fibre-optic cable production, is still undergoing certification and marketing, overall utilization is anticipated to rise gradually in line with the expansion of the underground utilities segment in 2HFY26, with roughly 50% of its production internally consumed for engineering works. This internal demand linkage ensures the manufacturing arm grows in tandem with core project activities.
Outlook and Recommendation
The investment bank reiterates an Outperform call, raising its target price to RM0.73 from RM0.67. This revision incorporates an upward adjustment in valuation multiple from 16.4x to 18.0x PE (+1 standard deviation) of CY26 4.06 sen EPS, reflecting the substantial earnings upside underpinned by the Group’s record-high orderbook. This upgraded valuation multiple reflects a more optimistic assessment of future earnings potential given the strong project pipeline and strategic positioning.
