UUE: Operations Stabilize, Strong Order Book Fuels Positive Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.64 (+32.5%) |
| Last Traded | RM0.49 |
| Recommendation |
A recent research report highlights a positive outlook for a key player in the construction and engineering sector, despite temporary operational challenges in the third quarter of FY26. The investment bank maintains its “BUY” recommendation, setting a target price of RM0.64, representing a 32.5% upside from the last traded price of RM0.49. The positive sentiment is underpinned by management’s proactive efforts to address temporary setbacks and a robust project pipeline.
Performance Review and Challenges
During 3QFY26, the company experienced operational hiccups in Singapore, including persistent permit approval delays and a slowdown in demand for its HDPE pipe products. This led to a segment loss of approximately MYR50k for the quarter. Utilization rates for HDPE pipe production fell to around 50%, although they have since improved to over 60% between December 2025 and January 2026. The quarter also saw higher administrative costs. Despite a 79% quarter-on-quarter rebound in Singapore revenue, these issues contributed to the segment’s temporary loss-making status. Management, however, views these challenges as temporary, anticipating improving project billing momentum and manufacturing utilization moving into 4QFY26.
Strategic Responses and Order Book Strength
In response to a challenging solar energy landscape—affected by shifts from Net Energy Metering to the Solar Accelerated Transition Action Programme (ATAP) PPAs, panel price volatility, and higher silver prices—management has implemented immediate headcount reductions to contain losses, adopting a “wait-and-see” approach for this segment.
Crucially, the company’s tender book remains healthy at approximately MYR300m. The Singapore portion stands at SGD50.8m (c.MYR160m), including a direct tender to Singtel for Horizontal Directional Drilling (HDD) works. The outstanding order book further reinforces this robust outlook, standing at MYR508.5m, with 62% related to Tenaga Nasional (TNB) projects. Malaysia contributed MYR51m quarterly, and the company continues to prioritize KPI delivery for TNB contracts to secure critical 2+1 extensions.
Future Outlook and Valuation
The investment bank expects earnings recovery to gain pace into FY27F, driven by the healthy order book and improving contributions from core operations. Management anticipates stronger Singapore contributions in 4QFY26 as project momentum improves, though acknowledges potential caps due to festive season downtime. The report’s forecasts for FY27F revenue (MYR250m) and PAT (MYR33-35m) are more aggressive than management’s guidance, based on expectations of stronger contract replenishment at potentially lower project margins. The target price of RM0.64 is based on a semi-diluted basis, factoring in 912m shares outstanding, 89.8m ESOS options granted in 3QFY26, and a 4% ESG discount. Key risks to this positive outlook include the failure to secure new contracts and potential delays in permit approvals.
