CBHB: Strong Cost Management Drives Earnings Beat, Positive Outlook Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
An engineering firm significantly surpassed expectations for its financial year 2025, driven by robust cost efficiencies and strong project execution. The company reported core net earnings of RM44.9mn, outperforming both internal and consensus forecasts by 128.0% and 127.8% respectively.
Performance Review
The outperformance was primarily attributed to a substantial expansion in core Profit Before Tax (PBT) margin, which saw a 610 basis points year-on-year increase. This was a direct result of effective cost savings from improved execution of existing projects and higher contributions from specific data centre (DC) projects that yielded better margins and are currently at peak execution phases.
While revenue for the year saw a 19.5% year-on-year decline, reflecting a slower burn rate for its order book (as over 80% of newly secured orders in 2HFY25 remained in early execution stages), the core PBT still managed to edge up 3.6%. This resilience was bolstered by the aforementioned cost savings and a significant 371.4% increase in finance income.
On a quarter-on-quarter basis, core earnings surged impressively by 303.3%, alongside a 189.2% increase in revenue. The core net margin improved significantly by 720 basis points, climbing from 18.4% to 25.6%. This was largely due to the commencement of progress billings from several newly secured projects, despite a higher effective tax rate in 4QFY25.
Future Outlook
As of end-December 2025, the firm’s total outstanding order book stood at RM591.8mn. This substantial backlog translates into a strong 2.7x cover of its FY25 revenue, providing clear earnings visibility for the next three years.
Looking ahead, the company anticipates replenishing its order book with RM600mn of new jobs in FY26. This positive momentum is supported by a tender book of approximately RM730mn, predominantly comprising DC M&E-related contracts. Analysts note that several of these tenders are at an advanced stage of finalization, and combined with the company’s proven execution track record, there is a high likelihood of these tenders converting into confirmed jobs in the coming months. The rapid expansion of Malaysia’s DC ecosystem is expected to continue driving demand for grid connection, substation upgrades, and power distribution systems, further supporting order book replenishment.
Analyst Recommendation
TA Securities maintains its BUY recommendation on the stock. The investment bank has rolled forward its valuation base year to CY27, deriving a higher target price of RM0.85 per share (previously RM0.82), based on a targeted PE multiple of 19.0x CY27 EPS. The firm remains favorable on the stock due to its strong presence in the robust DC power infrastructure construction sector and its scalable integrated M&E capabilities, positioning it to capitalize on sustained infrastructure investment momentum. The last traded price was RM0.555.
