CBHB: Earnings Outlook Strengthened by Robust Order Book Execution and Resilient Margins

Leading market analysis indicates a significant step-up in a construction engineering firm’s financial performance, driven by robust order book execution and stringent cost management. The firm’s outstanding order book currently stands at RM681.2 million, providing a healthy 2.9x cover of its FY24 revenue and ensuring substantial near-term earnings visibility.

Performance Review

Management projects approximately RM600 million of the current order book to be recognized in FY26. This acceleration is attributed to projects entering the steeper phase of the S-curve, leading to an estimated order book burn rate that is 49% higher than previous assumptions. This improved delivery capability is expected to translate into net earnings of roughly RM90 million in FY26, comfortably exceeding both prior forecasts and consensus expectations.

Order Book Replenishment and Future Outlook

The company is well-positioned for continued growth, with a submitted tender book of approximately RM730 million as of end-January CY26. This pipeline primarily consists of 3-5 data centre (DC) M&E-related contracts in key regions like Klang Valley and Johor, with awards anticipated in the near term. The firm also possesses the capacity to concurrently tender for RM800-900 million worth of projects, underscoring the depth of its opportunity pipeline. Strategically, the firm is prioritizing private-sector M&E projects, particularly in the data centre sector, due to their superior margin dynamics and higher job win probabilities, while selectively participating in government tenders for diversification and stability.

Resilient Margins

The firm’s overall margin profile is expected to remain resilient, with net margins projected to sustain within the 15-20% range. This is largely supported by disciplined cost management, especially in procurement, where established relationships with key suppliers secure competitive pricing. Furthermore, the firm’s role as a main contractor overseeing end-to-end project management enhances control over execution and contributes to stable margins even in a competitive environment.

Investment Recommendation

Given the strengthened earnings momentum and robust operational outlook, the investment bank has reiterated its “BUY” recommendation for the stock. The target price has been raised, reflecting the positive adjustments to earnings forecasts and the company’s strong positioning to capitalize on sustained infrastructure investment momentum. The firm’s dividend payout ratio is also expected to increase, supported by improving cash flow visibility and balance sheet strength.