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
- 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.
- 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.
- 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.
- 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.