HAWK: New Contract Bolsters Order Book, Liquidity Concerns Remain
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading engineering firm’s wholly-owned subsidiary, Steel Hawk Engineering Sdn Bhd (SHESB), has been awarded a significant RM35.0 million contract by Binalite Electrical Engineering Sdn Bhd. This contract is for the establishment of a 275kV bulk supply connection to a new data centre located in the southern region of Peninsular Malaysia.
The eight-month project, slated to run from November 2025 to July 2026, encompasses the engineering, installation, and commissioning of a crucial high-voltage connection system. This award represents a strategic expansion into the power infrastructure and data centre utility segment, complementing the group’s ongoing TNB-related EPCC ventures. Notably, it marks the company’s first high-voltage (275kV) data-centre-related undertaking, broadening its technical capabilities beyond traditional distribution-level work.
Financial Impact and Outlook
Management anticipates this new contract will contribute positively to FY25 earnings and provide an incremental earnings uplift during 2H25-1H26. The contract win has boosted the group’s expanded EPCC order book, which now stands at RM190.8 million, up from RM155.8 million. The gross margin for this project is estimated at around 20%, with a net margin of 10-11%, consistent with the company’s existing EPCC portfolio.
Analysts believe the award reinforces that the FY26 order book forecast remains on track, underpinned by a steady stream of project wins across both the utility and industrial sectors. Despite the positive order book development, earnings forecasts for FY25-FY27 have been maintained as the RM35 million contract is expected to deliver only modest contributions towards late FY25 and early FY26. The firm plans to review its assumptions once more precise progress billing details become available in subsequent quarters.
Liquidity Concerns Persist
Despite the recent contract win, analysts maintain a cautious outlook regarding the group’s working-capital constraints. Recent announcements indicate that proceeds from earlier fundraisings and additional share issuances are being directed towards funding project mobilisation. This continuous reliance on external financing highlights potential liquidity and execution risks inherent in the capital-intensive nature of EPCC contracts.
The investment bank maintains its Sell recommendation, with a target price of RM0.31 per share. This valuation is based on an 8.5x FY26F EPS and includes a 3% ESG premium.
