HEGROUP: Robust Pipeline and Diversification Bolster Outlook, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank briefing has highlighted a positive outlook, underpinned by a robust project pipeline, especially within the data centre (DC) segment, and strategic diversification initiatives. The company is well-positioned for significant growth, with its current order book projected to be fully recognized by 2026, contributing substantially to its future revenue forecasts.
Performance Review and Key Drivers
The company’s tender book reached a substantial RM1.1bn as of February 2026, with 95% of this volume stemming from DC projects. Management estimates a 20% success rate for its five major DC tender projects. Year-to-date, approximately RM20m in new contract wins have been secured, progressing towards a RM230m order book replenishment target. The outstanding order book currently stands at RM85m, predominantly comprising 64% DC projects, followed by E&E (15%), semiconductor (10%), medical (4%), and other segments (8%). This order book is expected to translate into 31% of the company’s revenue forecasts for 2026.
Strategic Expansion and Future Outlook
Beyond its core DC business, the company is actively pursuing diversification to broaden its revenue streams. Key initiatives include pursuing DC expansion opportunities in Thailand and Indonesia, and increasing exposure to the renewable energy sector through solar farm infrastructure and battery energy storage system (BESS) projects. The medical segment is also showing early signs of reinvestment, with two significant projects anticipated to open for tender in June 2026. Furthermore, the group is tendering for a port-related infrastructure project, aiming to further diversify its earnings base.
The overall outlook for 2026 remains positive, driven by these robust opportunities across the DC, medical, and renewable energy segments. However, semiconductor activity remains subdued, awaiting a recovery in customer capital expenditure cycles.
Risks and Challenges
Despite the optimistic outlook, the company faces several key risks. These include the potential for slower-than-expected order-book replenishment, unforeseen project delays, and pressure on project margins due to cost increases. These factors could impact the projected growth trajectory and financial performance.
Given the strong project pipeline, strategic diversification efforts, and an attractive valuation (as per the original report’s analysis, including a compelling 8.8x 2026E PER backed by a projected 42% EPS growth in 2026E), the investment bank maintains a BUY recommendation. The target price has been set at RM0.25, reflecting a 25.0% upside potential from the last traded price of RM0.20.
