CBHB: Strategic Expansion Fuels Growth Amid Strong Data Centre Demand, Target Price Raised

A recent investment bank research report anticipates robust earnings momentum, driven by consistent progress billings from a substantial unbilled order book. The firm is expected to report strong financial performance, exceeding prior expectations, primarily due to operational cost efficiencies and strategic project execution.

Performance Review and Outlook

The company is projected to announce 3QFY25 quarterly profits ranging between RM12.4 million and RM14.4 million. This performance is set to elevate its cumulative 9MFY25 earnings to approximately RM28.2 million – RM30.2 million, representing 70% to 75% of the full-year forecasts. The anticipated year-on-year and quarter-on-quarter earnings growth is largely attributed to steady progress billings from its current unbilled order book, which stands at RM554 million.

Order book replenishment visibility remains robust, particularly within Malaysia’s rapidly expanding data centre (DC) sector. Management has indicated strong job replenishment prospects, underpinned by accelerating investments from global DC hyperscale operators seeking to meet surging AI-driven data demand. The sustained investment momentum in this segment is further bolstered by favorable government policies, ample land availability, and reliable power supply, solidifying Malaysia’s position as a regional DC hub. Global hyperscalers such as Google and Microsoft are significantly expanding their local investments, contributing to a robust RM710 million tender book, with approximately 60% comprising DC-related projects. The company remains confident in achieving its FY25F new job win assumptions, supported by sustained hyperscaler investment momentum and its growing credentials in the DC power infrastructure segment.

Strategic Expansion and Workforce Growth

In a strategic move, the company is exploring expansion opportunities into Sarawak to participate in non-data centre (non-DC) substation EPCC projects under Tenaga Nasional Berhad (TNB). This initiative aims to capitalize on TNB’s significant RM42.8 billion investment allocation under its RP4 initiative (2025–2027), which focuses on upgrading and modernizing Malaysia’s transmission and distribution infrastructure. The firm is evaluating potential joint venture partnerships to facilitate its entry into the Sarawak market, with the initiative expected to materialize by CY26. This development is viewed positively, as successful execution would enhance order book replenishment prospects for CY26-27F, strengthening near-term earnings visibility.

To support its growing order book and ensure timely project execution, the company is actively expanding its workforce by hiring more new senior engineers. This initiative is considered timely, as it will position the firm well for its expansion into Sarawak and to capture rising opportunities in non-DC substation projects.

Investment Recommendation

The investment bank has upgraded its recommendation to BUY from HOLD, following a recent share price weakness that offers an attractive upside potential. The target price (TP) for the stock has been raised to RM0.25, representing a 25.0% upside. The firm continues to favor the stock due to its strong foothold in the robust DC power infrastructure construction space and its scalable integrated Mechanical & Electrical capabilities, which position it to capitalize on sustained infrastructure investment momentum. Key rerating catalysts include faster-than-expected order book burn rates and stronger-than-expected new job wins.