EXSIMHB: Earnings Inline, Robust Pipeline Boosts Future Outlook

The company’s core net profit for the first half of FY26 (IHFY26) reached RM16.8 million, aligning closely with the investment bank’s expectations and representing 50.1% of its full-year forecast. The company reported a significant year-on-year (YoY) surge in core earnings of 944.2%, primarily due to a low base effect from the previous financial year, which saw minimal contributions from its hospitality and interior fit-out segments.

Performance Review

On a quarter-on-quarter (QoQ) basis, revenue experienced a marginal contraction of 1.3%, mainly attributed to softer contributions from the interior fit-out segment, which saw a 19.3% decline. This was due to projects remaining in the early stages, leading to a slower order book burn. Despite the revenue dip, core profit after tax (PAT) remained largely flat QoQ. This stability was achieved as a 280 basis points (bps) improvement in operating margin effectively offset a similar 280bps increase in the effective tax rate.

The report also highlighted that the own-and-operate segment, including Corus Hotel and Tower E Hotel, did not contribute to earnings in this quarter as both properties are still undergoing renovations. These properties are expected to commence operations by 2HCY26.

Future Outlook

The design and fit-out division is anticipated to remain the primary earnings contributor, supported by a substantial unbilled order book of RM131.7 million, providing 0.9x coverage of its FY25 interior fit-out revenue. Year-to-date in FY26, the group has secured RM48.8 million in new jobs, representing approximately 19.5% of the full-year new job win assumption of RM250 million. While this figure appears modest, the investment bank believes replenishment momentum remains strong, bolstered by a steady pipeline of internal awards from its parent group’s property developments and participation in several large-scale tenders, including potential interior fit-out works for Merdeka 118.

For the hospitality segment, the company secured an additional 198 keys in 2QFY26, bringing its total keys under management to 1,637 units. Furthermore, an impressive over 2,000 ready-to-operational keys were secured in January 2026 alone. These ready-to-operational units are expected to materially contribute to the group’s earnings in the upcoming quarters. The investment bank foresees a strong earnings uplift in 3QFY26, driven by these new ready-to-operate keys and an accelerated order book burn rate in the interior fit-out segment as projects advance. The recovery of the tourism sector and the “Visit Malaysia Year 2026” initiative are also expected to bolster the hospitality segment’s near-term earnings visibility.

Valuation and Recommendation

TA SECURITIES has maintained its “BUY” recommendation on the stock, reiterating an unchanged target price of RM0.40. The investment bank’s positive stance is driven by the company’s strategic position as a beneficiary of its parent group’s expansive development pipeline, its robust hybrid hospitality strategy ensuring earnings visibility, and the potential for future value unlock through a hospitality REIT. Identified key downside risks include slower-than-expected new job replenishment and a potential weakening of the tourism sector outlook.