TALIWRK: Robust Operational Performance Underpins ‘Buy’ Rating Amidst Strategic Growth

An investment bank has maintained its “BUY” rating following a solid financial performance, with its FY25 core profit of MYR83.5 million achieving 99% of full-year projections, marking a 14% year-on-year increase. This outcome, which was largely within expectations, was primarily attributed to effective cost management and stronger contributions from its waste management segment.

Performance Review

The water treatment and supply division recorded a 4.5% year-on-year surge in EBIT for FY25, despite a slight 1.5% drop in metered sales. This positive EBIT growth was mainly driven by lower maintenance expenses. In contrast, the Grand Saga Highway division experienced a 19% year-on-year fall in EBIT, impacted by a marginal 0.1% year-on-year dip in average daily traffic and reduced government compensation, coupled with increased maintenance expenses.

The construction arm reported a pre-interest-and-tax loss of MYR0.1 million for FY25, a notable decline from FY24’s EBIT of MYR2.5 million. This was mainly due to a downward revision of the estimated profit margin for Package 2 of the Sungai Rasau waterworks project. However, the renewable energy segment demonstrated significant growth, with FY25 EBIT soaring to MYR12.6 million from MYR1.2 million in FY24, boosted by higher energy output and the absence of prior year write-offs and contractor costs for old solar panels.

Future Outlook and Catalysts

The investment bank anticipates FY26-27 to be a period of formidable execution for the Sungai Rasau waterworks project, with Package 2 and 3 reaching completion rates of 34% and 17% respectively by end-December 2025. Package 2 is slated for completion in 1H27, and Package 3 in 4Q26, indicating substantial revenue recognition in the coming years.

Potential rerating catalysts include securing new job wins for its construction division, particularly given identified tenders worth over MYR1 billion related to water infrastructure projects. Another positive factor would be a quicker-than-expected approval of a tariff rate hike for its waste management associate. However, key downside risks could arise from lower-than-expected water consumption.

Analyst’s View

Analysts have slightly trimmed FY26-27F earnings by 3% and 4% to reflect revised margin assumptions for the Sungai Rasau project. Despite this adjustment, the “BUY” recommendation is maintained, underscoring the company’s domestic-centric focus, undemanding valuation, and attractive dividend yield prospects. The stock continues to trade at a discount to its 10-year mean P/E.