Plugged into Infrastructure Tailwinds

Background

UUE is principally involved in the provision of underground utilities engineering solutions and also manufactures and trades HDPE pipes.

UUE is principally involved in the provision of underground utilities engineering solutions. The Group specialises in the HDD method of laying pipes and employs the open cut and micro trenching excavation methods. UUE also manufactures and trades HDPE pipes, primarily to complement its underground utilities engineering projects in Malaysia and Singapore. UUE serves electricity and telecommunications end user markets in both countries.

Figure 1: Corporate Structure

UUE Holdings Berhad has two main divisions:

• Underground Utilities Engineering (100% owned), which fully owns:
  • Kum Fatt Engineering Sdn Bhd
  • Konnection Engineering Pte Ltd
• Manufacturing & Trading of HDPE pipes (100% owned), which fully owns:
  • Premier Plastic Industry Sdn. Bhd.

Business Overview

UUE via its subsidiaries, Kum Fatt Engineering SB in Malaysia and Konnection Engineering PL in Singapore, typically serves as a subcontractor for underground utilities engineering projects. In these engagements, the Group is responsible for project management, utility detection and mapping, and providing HDD technical expertise, supported by the required machinery, materials, and general labor resources.

UUE specialises in the HDD method for laying HDPE pipes, primarily serving the electricity supply industry and telecommunications sectors. Using the HDD method, UUE undertakes the tracing, mapping, procurement, supply, installation, testing, commissioning, inspection, repair, and maintenance of i) power cables, auxiliary cables and accessories for the transmission and distribution of electricity, as well as ii) telecommunication and fibre optic networks for fixed line and mobile network services. HDD is a trenchless excavation method that installs pipelines underground at depths of 3m to 20m with minimal surface disruption, producing tunnels sized 10mm to 1,000mm using high-pressure fluid jets and sometimes cutting blades. HDD is especially suitable for developed, congested, and high-traffic urban areas due to its low noise and minimal traffic disruption. Additional benefits of HDD include accurate and flexible pipeline placement, shorter construction periods, fewer external constraints, more effective installation, and lower construction costs.

Open trench excavation involves digging a pit along a specified route to install pipelines or cables close to the surface, typically up to 1.5m deep. This method is cost-effective for non-pavement areas but requires pavement restoration if used in paved areas. It supports the installation of high-capacity utilities (high number of cables and/or pipelines with wide diameter pipes). UUE typically engages subcontractors to carry out activities in the open trench excavation method.

Micro trenching is a cost-effective technique for deploying cables, especially in urban areas. It uses a small rockwheel to cut narrow trenches, 10-50mm wide and up to 400mm deep. After cutting, UUE’s subcontractors lay protective ducts for fibre optic cables and fill the trenches with ideal infill system using resin. This method results in minimal surface disruption and a strong bond.

About 70.0% of the pipes are used for its underground utilities engineering segments

UUE via Premier Plastic Industry SB (PPI), manufactures HDPE pipes to complement its underground utilities engineering solutions. About 50.0% of the pipes are used for its underground utilities engineering segments, while the rest are sold to external customers. UUE’s HDPE pipes, made from HDPE polymer, are used for electrical and telecommunication conduits.

Table 2: Revenue segmentation by business activity

Table 3: Revenue segmentation by geographical market

Investment Merits

Malaysia orderbook fuelling foundational growth.

About 80% of orderbook is contributed by Tenaga Nasional (RM338m) with scope mainly within 11kV and 33 kV mid voltage distribution network

UUE’s domestic operations continue to serve as the backbone of its earnings visibility, underpinned by an all-time high orderbook of RM421.7m as at end-June 2025. About 80% of this is contributed by Tenaga Nasional (RM338m), while 12% comes from telco and others infrastructure clients including CelcomDigi and Maxis. The Group has established a strong presence in southern Peninsular Malaysia and is gradually expanding into the east coast and northern regions, supported by ongoing industrial activity and urbanisation trends. Its project scope includes the supply and installation of HDPE pipes, open trenching, and HDD, mainly within the 11kV and 33kV mid-voltage range. These distribution level jobs tend to offer quicker turnaround and more consistent volume compared to high-voltage transmission works. Looking ahead, the outlook is supported by the on-going RP4 cycle, which lifts Tenaga’s capex to RM42.8bn (from RM20.6bn under RP3), reaffirming the government’s push for grid modernisation and connectivity expansion. Backed by solid project delivery and in-house manufacturing capabilities, UUE is well-positioned to maintain healthy job replenishment in domestic market.

Figure 2: Historical orderbook profile

Turning Singapore into a scalable growth engine.

This marked a strategic shift from its earlier services-heavy roles to a more integrated scope involving both raw material supply and on-site execution

UUE’s operations in Singapore have gained meaningful traction over the years, with segment revenue recording a 32% CAGR to RM25.8m. Gross margins remain healthy, consistently exceeding 50%, supported by a high-value service mix and a lean operating model. A major milestone was secured in April 2025 when the Group secured a RM28.1m (SGD8.4m) subcontract from SP PowerAssets Ltd, covering the supply and installation of HDPE pipes via HDD. This marked a strategic shift from its earlier services heavy roles to a more integrated scope involving both raw material supply and on-site execution, expanding its revenue base while preserving its commendable margin profile in Singapore. Looking ahead, the Group is well-positioned to benefit from Singapore’s multiyear grid upgrade programme, particularly SP Group’s strategic push to expand its underground cable network and upgrade its 400kV transmission backbone.

Acquiring more machinery and unlocking subsea opportunity.

Venturing into subsea HDD

Since its IPO, UUE has expanded its fleet with four additional HDD machines to support its growing order book across Malaysia and Singapore. Among the new additions is a Maxi Rig unit, which allows the Group to offer subsea HDD services, an advanced technique used to install pipelines and cables beneath the seabed by drilling from an onshore entry point to a designated offshore exit. This method is crucial for deploying fibre optic lines, power cables, water infrastructure, and oil & gas pipelines. The capital-intensive nature and engineering complexity of subsea HDD create a high barrier to entry, limiting competition and strengthening the Group’s value proposition in specialist infrastructure works. A major strategic step in this direction was the signing of a MoU with ASEAN Cableship Pte Ltd, a regional submarine cable service provider jointly owned by six ASEAN telcos. This collaboration aims to offer integrated subsea solutions, with UUE providing HDD shore landing services alongside ASEAN Cableship’s cable-laying fleet.

Table 4: HDD Machine Fleet

Figure 3: Maxi Rig application for subsea HDD technique

The subsea HDD technique involves several stages. First, an HDD machine drills a pilot hole from an onshore location, navigating under obstacles and out to a designated exit point in the sea. The drill pipe is then attached to a reamer, which enlarges the tunnel as it is pulled back towards the rig. Finally, the prefabricated product pipe is attached to the reamer and swivel assembly and pulled through the enlarged tunnel, completing the installation beneath the seabed with minimal surface or marine disruption.

Ramping up manufacturing capacity as third growth engine.

New facility that will house 6-9 additional lines, with construction targeted for completion by June 2026.

To support rising demand from both internal and external customers, UUE has significantly enhanced its HDPE pipe manufacturing capacity, from 925 kg/hour across two lines to 1,400 kg/hour, following production upgrades in December 2024 and the commissioning of a third line in February 2025. PPI, plays a critical role in its vertically integrated business model, with approximately 50% of output supplied internally to support the Group’s underground utility projects. This synergy helps the Group contain costs, protect margins, and improve execution turnaround. PPI was operating at 65.7% utilisation in FY25, with management aiming for 50-60% in FY26F including the increased capacity. To prepare for the next phase of growth, the Group has acquired a land in Kota Tinggi for a new facility that will house 6-9 additional lines, with construction targeted for completion by June 2026. The new plant will also introduce new products such as corrugated pipes, which are in demand among developers and offer cost efficiencies due to lower resin usage. In-house pipe supply also strengthens job economics in Singapore, where external sourcing is more expensive.

Figure 4: PPI capacity upgrades

Table 5: New factory plan

New Factory Timeline

• January 2025: Submitted of planning permission to Majlis Perbandaran Kota Tinggi
• March 2025: Completed acquisition of land. Approved planning permission obtained.
• April 2025: Approved building plan obtained.
• September 2025: Target to commence construction.
• June 2026: Target to complete construction.

Investment Risks

Cost overruns due to external delays.

Coordination with multiple agencies (e.g. JKR, DBKL) could complicate permit workflows.

UUE’s project execution is dependent on timely approvals from external authorities, especially for underground works that require multiple regulatory permits, such as road closures, utility mapping, and land access. Delays in obtaining these approvals can cause project slippage, incur idling costs, and reduce work progress, leading to potential cost overruns. This risk is particularly prevalent in urban areas, where high traffic density, congested underground utilities, and coordination with multiple agencies (e.g. JKR, DBKL) complicate permit workflows. Additionally, during peak festive seasons such as Hari Raya and Chinese New Year, many offices operate at reduced capacity, slowing down approval cycles and on-site inspections. While UUE typically builds buffer time into project schedules, prolonged delays may strain margins or working capital, especially on fixed-price contracts.

Table 6: Sample of relevant permit and agencies

Reliance on main contractors for job flow.

This niche positioning inherently limits its tender eligibility for larger turnkey packages.

UUE’s subcontracted work is typically secured through main contractors or project EPC partners such as Komasi and Sutera Utama in Malaysia, and Wee Guan in Singapore. This indirect business model exposes the Group to dependency risk, where fluctuations in the main contractor’s project wins, financial health, or reputation may affect UUE’s job continuity and orderbook conversion. While UUE maintains strong working relationships and repeat project history with these firms, including under an Exclusive Engineering Service Provider Agreement, it has limited control over the tendering process or final commercial terms with end clients. Due to the specialised nature of UUE’s work scopes, which typically involve cable laying, HDD, or conduit installation, it does not participate as the main EPCC contractor. This niche positioning inherently limits its tender eligibility for larger turnkey packages, suggesting that reliance on main contractors will remain a structural feature of its business model.

Table 7: Revenue from key main contractor

Industry Outlook

Riding on rising electricity demand and energy transition in Malaysia.

Distribution network and retail accounted for 56.9% of total 2024 capex, the highest proportion since 2018.

Malaysia’s electricity sector is undergoing a structural transformation, driven by accelerating demand growth, largely fueled by data centre expansion and national decarbonisation goals. Tenaga Nasional, which contributes over 80% of UUE’s orderbook, remains at the forefront of utility infrastructure development with total capex rising to RM11.2bn in 2024, from RM7.85bn in 2020, reflecting renewed urgency to modernise and strengthen grid reliability. On this note, capex allocated to distribution network and retail jumped 24.2% YoY to RM6.4bn, accounting for 56.9% of total capex, the highest proportion since 2018. Looking forward, RP4 allocates RM42.8bn in capex for 2025-2027, more than double the RM20.6bn allocated in RP3. This includes investments in grid reinforcement, microgrid deployment, and system upgrades to enable greater renewable energy integration in line with the National Energy Transition Roadmap (NETR). Backed by a proven execution track record, in-house HDPE pipe manufacturing, and strong positioning in the 11kV/33kV of distribution network segment, UUE is well-placed to benefit from the ongoing electrification and grid modernisation wave across Peninsular Malaysia.

Figure 5: Tenaga Nasional capex allocation

Entering new grid capex cycle in Singapore.

Taihan Cable’s USD630m contract rollout could benefit UUE

Singapore’s electricity grid is fully owned by SP PowerAssets, the national transmission and distribution licensee under SP Group. With limited land space, Singapore adopted an underground infrastructure approach spanning over 27,000 km of cables. A key milestone was the recent commissioning of the 230 kV underground substation beneath Labrador Tower, highlighting the long-term shift toward integrated, space-saving grid solutions. After a brief moderation, SP PowerAssets’ capex rebounded to SGD975.5m in 2024, the highest since 2020, signalling a renewed upgrade cycle. This was reinforced by Taihan Cable’s USD630m contract to supply and install 400 kV underground cables. The rollout of this mega project is expected to benefit downstream players like UUE involved in conduit supply, HDD works, and underground installations, paving the way for stronger job flows ahead.

Figure 6: SP PowerAsset historical capex

Financial Highlights

Projecting an earnings CAGR of 24.3%, driven by strong topline expansion while margin is expected to remain resilient.

UUE’s revenue increased from RM51.7m to RM170.0m over five years, registering a CAGR of 34.6%. The Group recorded strong growth in its underground utilities engineering solutions segment, with revenue rising from RM44.1m in FY21 to RM147.6m in FY25, translating to a CAGR of 35.3%. This was mainly driven by higher project wins and progress billings in the southern and eastern regions of Peninsular Malaysia, as well as consistent work orders from Singapore throughout the period. Additionally, HDPE pipe manufacturing revenue increased from RM7.6m in FY21 to RM22.5m in FY25, a CAGR of 30.9%, supported by robust third-party demand. The segment now contributes approximately 13.2% of group revenue.

EBITDA margin remained healthy across the period, averaging 24.1% between FY21 and FY25. It peaked at 29.2% in FY22, supported by high-margin jobs, particularly from the completion of Project NDC 265 under the Singapore segment. The margin then moderated to 21.9% in FY25, in line with a lower proportion of Singapore works. Despite the margin normalisation, EBITDA increased from RM12.8m in FY21 to RM37.2m in FY25, registering a CAGR of 30.7%.

Net profit grew steadily from RM7.4m in FY21 to RM23.0m in FY25, translating to a CAGR of 32.9%. This was driven by strong topline expansion, healthy EBITDA generation, and improved scale efficiency across its engineering and manufacturing operations. Net margin remained relatively stable, averaging around 15.2% over the five-year period, with some moderation observed for FY24 and FY25 towards 12.7% and 13.5% respectively. The decline was mainly attributed to increased depreciation, finance costs, and upfront investments in new business lines, including the upgrading of its manufacturing lines and the acquisition of Maxi Rig HDD.

Moving forward, we expect the Group to deliver 24.3% CAGR for FY26-28F, underpinned by its all-time high orderbook of RM421.7m, which is equivalent to more than double of our FY26F annual revenue estimates. This growth is supported by rising infrastructure spending in both Malaysia and Singapore, along with the added advantage of vertical integration through its manufacturing segment. Margins are expected to remain resilient, driven by a higher contribution from ongoing projects in Singapore and internal HDPE pipe supply, which enhances cost efficiency and project control.

Figure 7: Revenue, PATMI and Margins

Net gearing ratio improved significantly over the five-year period, declining from 0.27x in FY21 to 0.05x in FY25. The improvement was driven by steady earnings growth, stronger cash generation, and prudent debt utilisation, particularly following the equity injection from its IPO. With a low net gearing position of 0.05x as at end-FY25, the Group maintains ample balance sheet flexibility to support its ongoing expansion in manufacturing and underground utilities engineering operations. We expect the net gearing remains low in tandem with its prudent growth strategy.

Dividend policy. UUE currently does not have a formal dividend policy in place.

Valuations

P/E valuation approach.

We initiate coverage on UUE with target price of RM1.00, pegging it to a 16.4x PE multiple based on UUE’s CY26F 6.09sen, slightly higher than its mean, justified by its multi-year growth outlook.

Figure 8: 1-year annualised forward PE ratio

The chart shows the 1-year annualized forward PE ratio from July 2024 to July 2025. The ratio fluctuates around a mean of 16.0, with a +1 standard deviation line at 18.3 and a -1 standard deviation line at 13.7.

Table 8: Peers comparison

UUE Holdings, Jati Tinggi Group, and MN Holdings operate in Malaysia’s underground utilities engineering segment but with distinct spectrum focus. UUE specialises in underground distribution works (mainly 11kV/33kV), complemented by in-house HDPE pipe manufacturing and growing cross-border exposure in Singapore. Its scope revolves around high-volume, mid-voltage cable laying, HDD works, and conduit installation, often as a specialist subcontractor.

In contrast, Jati Tinggi focuses primarily on the transmission segment, undertaking 132kV and 275kV underground cable systems and substation construction as a main EPCC contractor for TNB including data center connection. It also has some exposure within 11kV/33kV distribution works.

MN Holdings, meanwhile, plays a dual role, delivering 132kV/275kV cabling works and substation for both TNB and the private sector, notably data centre developers and LSS projects.

Environment, Social and Governance (ESG)

Environmental: UUE commits to environmental protection through actions such as installing rooftop solar systems to reduce greenhouse gas emissions and using rainwater harvesting systems to lower water consumption for its factor. It also pledges compliance with relevant environmental regulations and responsible waste management practices.

Social: UUE prioritises a safe and inclusive workplace by eliminating misconduct upholding equal opportunity regardless of background, and prohibiting child and forced labour. It also focuses on employee development and contributes to surrounding communities through CSR initiatives and donations.

Governance: UUE adopts ethical business practices in line with legal standards and the Malaysian Code on Corporate Governance (MCCG). It has implemented policies such as an Anti-Bribery and Anti-Corruption Policy, Whistleblowing Policy, and Personal Data Protection Policy to strengthen internal controls and promote transparency.

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