SSB8: Construction Firm Reports Strong Earnings Beat on Operational Gains, Positive Outlook Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading construction firm reported a robust financial performance for the fiscal year ending June (FY25), with its core net profit soaring by 31% year-on-year to RM39 million. These results exceeded internal expectations, accounting for 103% of the full-year forecasts, signaling strong operational momentum.
Performance Review
The firm’s impressive FY25 revenue of RM221 million, a 30% increase year-on-year, was primarily fueled by the accelerated progress billings of existing projects and a five-month contribution from its recent acquisition, SJEE. Furthermore, the EBITDA margin saw a healthy improvement of 2.6 percentage points year-on-year, attributed to stronger operating leverage.
On a sequential basis, the fourth quarter of FY25 also demonstrated strength, with core net profit rising by 16% quarter-on-quarter to RM11.5 million. This was driven by a 35% quarter-on-quarter increase in revenue to RM81 million, propelled by robust progress on data centre (DC) MEP services projects and a significant uplift in main contractor works. However, the EBITDA margin for 4QFY25 experienced a decline to 22.3%, a 4.2 percentage point drop quarter-on-quarter, primarily due to the higher revenue contribution from SJEE’s M&E services, which typically command lower margins compared to turnkey contractor projects.
Future Outlook and Investment Perspective
Looking ahead, the investment bank, PhillipCapital, anticipates an even stronger earnings momentum for FY26E, projecting a significant 105% year-on-year growth. This optimistic outlook is underpinned by the full-year contribution from SJEE and an expectation of substantial new contract wins. The firm’s outstanding order book stands at a healthy RM1.3 billion as of June 2025, providing strong revenue visibility.
New contract acquisition is expected to gain traction, supported by a tender book totaling RM1.2 billion. This tender pipeline is diversified, comprising 39% from DC projects, 30% from residential developments, and 30% from government-related buildings. PhillipCapital has also introduced its FY28E earnings forecast, projecting an 18% growth, buoyed by promising prospects within the fast-growing DC sector and recurring contract flows from anchor clients.
PhillipCapital has reiterated its BUY rating for the firm, maintaining a target price of RM0.75, pegged to an 18x PE multiple on FY27E EPS, from a last close price of RM0.58. The strategic expansion into the DC sector, coupled with robust order book visibility from existing anchor clients, remains a key driver for this positive recommendation. Key risks to this outlook include potential slower order book replenishment and unexpected project cost overruns.
