HAWK: New Subcontract Bolsters Long-Term Stability, Buy Rating Affirmed
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.37 (+60.9%) |
| Last Traded | RM0.23 |
| Recommendation |
A recent subcontract award has reinforced the order book visibility and long-term revenue stability for a key player in the fire protection and safety-related engineering sector. While the financial impact is deemed modest in the near term, analysts at TA Securities maintain their “BUY” recommendation, citing operational positives and future upside potential.
Contract Details and Operational Impact
Steel Hawk Engineering Sdn Bhd (“SHESB”), a wholly-owned subsidiary, has secured a subcontract from Eternity Mode Sdn Bhd. This agreement covers the procurement, construction, and commissioning of fire-rated doors specifically for the Sabah region. Operating on a call-out basis, the contract has no fixed value but extends for approximately two years and nine months, from January 20, 2026, to October 31, 2028.
Management has indicated that the contract is not expected to have a material impact on net assets for fiscal year 2026 but is anticipated to contribute positively to earnings. TA Securities views this award as “operationally positive” due to its strategic benefits, even if “financially modest” in the short term.
Strategic Reinforcement and Outlook
The new subcontract strengthens the company’s established track record in fire protection and safety-related engineering works. Crucially, it enhances order book visibility in East Malaysia and aligns perfectly with the Group’s core competency, introducing no new operational risks. This is seen as a supportive factor for business sustainability rather than a significant near-term earnings catalyst.
TA Securities has not revised its earnings forecasts for FY26-FY27 at this juncture, attributing this to the inherent lack of visibility regarding contract value and work order flow from the call-out nature. However, the investment bank highlights an upside risk should call-out volumes exceed expectations, particularly if project activity in Sabah accelerates over the contract period.
Valuation and Recommendation
TA Securities maintains its BUY recommendation with an unchanged target price of RM0.37 per share. This valuation is based on 8.5x FY26F EPS and includes a 3% ESG premium. Analysts emphasize that while the immediate financial impact of this contract is not substantial, its role in adding incremental earnings support and underpinning long-term revenue stability is significant for the company’s valuation.
