CHB: Strong Earnings and Robust Order Book Drive Positive Outlook, Target Price Raised
| Investment Bank | PhillipCapital |
|---|---|
| TP (Target Price) | RM1.80 (+111.8%) |
| Last Traded | RM0.85 |
| Recommendation |
The company reported robust financial results for the first quarter of FY26, with earnings reaching RM5.2 million. This performance represents a significant 46% year-on-year increase and was broadly in line with market expectations, constituting 16% of the full-year forecast.
Performance Review
The positive earnings momentum was primarily attributed to quicker progress billing from existing orders and anticipated new contract wins. Despite a softer top-line growth compared to the previous quarter, the company demonstrated strong operational efficiency, with its EBITDA margin improving by 1 percentage point to 10.2%. This margin expansion was largely due to front-loaded project costs incurred in the prior quarter. Furthermore, the company’s net cash position strengthened to RM102.9 million, an increase of 22% quarter-on-quarter, highlighting sound financial management.
Future Outlook and Growth Catalysts
Prospects for sustained earnings visibility remain strong, underpinned by a healthy outstanding order book which stood at RM148 million as of September 2025. This includes a recent RM40.8 million Mechanical and Electrical (M&E) contract secured from a semiconductor multinational corporation in August. The first quarter alone saw RM68 million in new contract wins. The replenishment outlook is further bolstered by a substantial RM800 million tender book, with approximately 70% allocated to data centre and 30% to semiconductor projects. This tender book is expected to expand in the coming quarters, driven by increasing demand for semiconductor projects linked to AI applications and a growing pipeline of medical tenders. A key near-term catalyst is the anticipated award of further data centre contracts. However, potential downside risks include lower-than-expected new contract wins, weaker-than-expected margins, and project execution challenges.
Investment Recommendation
PhillipCapital has maintained its “BUY” rating on the company, revising its target price upwards to RM1.80. This adjustment reflects rolling forward the valuation horizon to FY27E, based on an unchanged target Price-to-Earnings Ratio (PER) of 18x. The investment bank remains optimistic about the company’s outlook, citing a robust tender pipeline and structural tailwinds from global trade diversion. Increasing demand in semiconductor, data centre, and medical sectors are seen as clear growth catalysts. The revised target price implies a significant total return of 111.8% from the last traded price of RM0.85.
