NEXG (5216): Securing Future Growth with Extended Government Contracts

NEXG (5216): Securing Future Growth with Extended Government Contracts

Summary (TL;DR):

  • Research Firm: RHB Investment Bank
  • Subject: NEXG / NEXG (5216)
  • Core Rating: BUY
  • Target Price / Top Picks: MYR 0.48
  • One-Liner: NexG’s sustained success in securing crucial government contract extensions for e-Passport and MyKad solutions, alongside maintenance services, underpins its stable earnings outlook.

Report at a Glance

RHB Investment Bank released its latest research report on NEXG on 2025-07-08, maintaining a BUY rating with a target price of MYR 0.48. The core thesis of the report is that NexG continues to demonstrate its capability in delivering mission-critical public services by securing significant contract extensions from the Home Affairs Ministry (KDN), reinforcing its earnings visibility and market position.

Investment Thesis (The Bull Case)

  • Point 1: Secured significant contract extensions from the Home Affairs Ministry (KDN) for e-Passport solutions and polycarbonate biodata page supplies for a six-month period (Dec 2025 – May 2026).
  • Point 2: Obtained another extension for the supply of MyKad, MyTentera, and MyPOCA raw cards and consumables to the National Registration Department (JPN), valued at MYR29.7m for six months (Dec 2025 – May 2026).
  • Point 3 / Key Beneficiaries: Concurrently awarded a 14-month extension (Dec 2025 – Jan 2027) for comprehensive maintenance services of card personalisation centres at JPN, worth MYR15.9m, which is a testament to the group’s ability to deliver public services.

Potential Risks (The Bear Case)

  • Risk 1: Higher input costs could erode profit margins.
  • Risk 2: Weaker-than-expected orders or non-renewal of key contracts could impact future revenue.
  • Risk 3: Changes in government policies or governance concerns (as indicated by a Moderate ESG G Score) pose potential headwinds.

Financial Forecast Summary

The analyst’s financial projections for the coming years are as follows:

Fiscal Year (YE to March) FY26F FY27F FY28F
Revenue (RM mil) 373 359 376
Net Profit (RM mil) 90 87 91
EPS (sen) 2 2 2
DPS (sen) 0 0 0
Dividend Yield (%) 0.5 0.5 0.5
P/E Ratio (x) 19.35 20.21 19.27

(Source: RHB Investment Bank research report)

Valuation & Target Price

Rating BUY
Last Close Price MYR 0.42
Target Price (TP) MYR 0.48
Valuation Methodology The target price of MYR 0.48 is based on an unchanged 20x FY26F P/E, which aligns with NexG’s 5-year mean. This valuation includes a 4% ESG discount, as NexG’s 2.8 ESG score is below the 3.0 country mean.

Analyst’s Conclusion

  1. Overall Stance: RHB Investment Bank maintains a “BUY” rating on NexG, expressing positivity towards its competitive strength in niche solutions, healthy yields, strong cash flow generation, and potential upside from new project wins at attractive valuations.
  2. Key Catalyst/Strength: The continuous securing of contract extensions for critical government projects, such as e-Passports and MyKads, and comprehensive maintenance services, provides a strong and stable earnings outlook.
  3. Major Headwind/Risk: Key risks include the potential for higher input costs, a slowdown in orders or non-renewal of contracts, and adverse changes in government policies, alongside existing governance concerns.
  4. What to Watch: Investors should closely monitor the ongoing evaluation of proposals for improved passport solutions and new printing systems, which could lead to longer-term contracts, as well as any announcements of new project wins.
Disclaimer: This article is a summary and interpretation of a research report published by RHB Investment Bank on 2025-07-08. All information is for reference purposes only and does not constitute investment advice. Investors should conduct their own independent research and due diligence and assume all associated risks.

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