UUE: Operations Overcome Setbacks with Recovery in Singapore, Outperform Rating Maintained

Performance Review and Challenges

Public Investment Bank currently holds a cautiously optimistic view on the near-term prospects, despite the company reporting weaker 3QFY26 results. The downturn was primarily attributed to challenges in its Singapore underground utilities engineering segment, which faced heightened work permit restrictions following a sinkhole incident. This also led to softer demand for HDPE pipes, contributing to a drop in manufacturing utilisation to 50.1%.

During the quarter, Singapore operations generated RM9.1 million in revenue, a notable increase from RM5.1 million in 2QFY26, but still recorded marginal losses of approximately RM50,000 due to the stringent work permit regime. Concurrently, Malaysia’s domestic revenue experienced a robust 36.5% year-on-year growth to RM50.9 million, although it saw a slight moderation of 3.1% quarter-on-quarter due to project phasing. The overall manufacturing utilisation eased slightly from 52.5% in 2QFY26 to 50.1% in 3QFY26, influenced by the softer demand from Singapore and a reduced contribution from Line 3, which focuses on fibre optic conduit and is in its early phase of market penetration.

Future Outlook and Recovery Measures

Looking ahead, management has indicated that the work permit issuance process in Singapore has normalised, with a higher volume of permits now being approved. Orders for HDPE pipes have also started to pick up since December, and 6-8 project teams are actively deployed on-site, ensuring smoother project execution.

Malaysia remains a pivotal earnings driver, bolstered by a strong order book, particularly from TNB-related contracts. These contracts amount to RM314.3 million, providing earnings visibility for up to two years and offering potential for additional extension orders. Analysts anticipate significant spillover opportunities from TNB’s Regulatory Period 4 (2025-2027) capital expenditure. Demand for electric conduit, supported by Lines 1 and 2 operating at over 70% utilisation, remains resilient.

Furthermore, a new manufacturing factory is on schedule for completion by June 2026. This facility is designed to accommodate six to nine new production lines, aligning capacity with anticipated demand trends following market studies. While acknowledging a potential slight slowdown in operations and work permit approvals during the upcoming festive seasons in 4QFY26 and 1QFY27, the overall outlook remains positive.

Analyst Recommendation

Public Investment Bank maintains its Outperform call on the company, with an unchanged target price of RM0.73. This recommendation is supported by the Group’s sustained high order book, which currently stands at RM508.5 million.