Pekat (PEKAT МК)
TNB maintenance contract win
MALAYSIA | RENEWABLES | UPDATE
- Pekat secured a RM31.3m maintenance contract from TNB to supply AIS and GIS switchgear for its existing distribution network
- EPE Switchgear’s YTD new wins total RM263.8m, bringing its outstanding order book to RM356.3m
- Maintain HOLD rating and 12-month TP of RM1.57
Secured TNB maintenance contract to supply AIS and GIS switchgear
Pekat’s 60%-owned subsidiary, EPE Switchgear, has secured a RM31.3m contract from TNB for the maintenance, servicing, and repair of air insulated switchgear (AIS) and gas insulated switchgear (GIS) across its distribution network. The scope, which includes the supply and installation of spare parts, runs for 2 years, with an option for a 1-year extension at TNB’s discretion.
YTD new wins totalled RM264m; eyeing another long-term contract
We estimate the net profit margin for this project to be at 15%, in line with margins typically seen in TNB’s maintenance contracts, which are above EPE Switchgear’s historical average of 10-12%. Inclusive of this win, EPE’s Switchgear outstanding order book has risen to RM356m, translating into a 2.6x FY24 revenue cover ratio. YTD new wins total RM264m, surpassing our initial 2025E annual order book replenishment target of RM240m. We understand that Pekat is eyeing another TNB long-term contract to supply a ring main unit (RMU), potentially worth RM100-130m. The tender was recently closed in Jul25, with the award expected to be made by 1Q26. We reaffirm our positive outlook on Pekat as a key beneficiary of TNB’s higher allowable capex of RM42.8bn under RP4 (2025-27), supported by EPE Switchgear’s estimated 30% market share in the medium-voltage switchgear market.
Maintain HOLD and TP of RM1.57
While contract wins have exceeded our initial assumption, we make no changes to our earnings forecast pending the release of Pekat’s upcoming 2Q25 results, scheduled on 22nd August. We maintain our HOLD rating and SOP-derived TP of RM1.57. Key re-rating catalysts include quicker-than-expected contract awards. Key risks to our HOLD call include better-than-expected project margins, unforeseen execution delays, project cost overruns from intense market competition, and sharp increase in solar panel prices.
Key Financials
| Y/E Dec | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Revenue (RMm) | 227.5 | 291.1 | 557.5 | 594.9 | 649.1 |
| EBITDA (RMm) | 21.0 | 37.0 | 73.5 | 84.4 | 91.5 |
| Pretax profit (RMm) | 18.1 | 34.6 | 65.2 | 73.5 | 80.1 |
| Net profit (RMm) | 13.7 | 22.0 | 38.5 | 46.5 | 51.2 |
| EPS (sen) | 2.1 | 3.4 | 6.0 | 7.2 | 7.9 |
| PER (x) | 63.4 | 39.5 | 22.6 | 18.7 | 17.0 |
| Core net profit (RMm) | 14.3 | 20.8 | 38.5 | 46.5 | 51.2 |
| Core EPS (sen) | 2.2 | 3.2 | 6.0 | 7.2 | 7.9 |
| Core EPS growth (%) | 47.1 | 45.7 | 85.5 | 20.6 | 9.9 |
| Core PER (x) | 61.1 | 41.9 | 22.6 | 18.7 | 17.0 |
| Net DPS (sen) | 1.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Dividend Yield (%) | 0.7 | 0.0 | 0.0 | 0.0 | 0.0 |
| EV/EBITDA (x) | 40.4 | 25.0 | 12.8 | 11.3 | 9.9 |
| Chg in EPS (%) | – | – | – | – | – |
| Phillip/Consensus (%) | – | – | 0.8 | 0.9 | 0.8 |
Sources: Company, Bloomberg, Phillip Research forecasts
Table 1: Sum of Parts (SOP) Valuation
| SOP Component | Value (RMm) | PE (x) | SOP Value (RMm) |
|---|---|---|---|
| Solar | 18 | 30 | 542 |
| Earthing and lightning protection | 13 | 20 | 255 |
| EPE Switchgear | 12 | 20 | 238 |
| Solar assets (WACC 5.1%) | 61 | 61 | |
| Net cash/(debt) | (80) | ||
| SOP Value | 1,016 | ||
| No. of shares (m) | 645 | ||
| SOP/share (RM) | 1.57 |
Source: Phillip Research forecasts
FINANCIALS
Income Statement
| Y/E Dec (RMm) | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Revenue | 227.5 | 291.1 | 557.5 | 594.9 | 649.1 |
| Operating expenses | (206.4) | (254.1) | (484.1) | (510.5) | (557.6) |
| EBITDA | 21.0 | 37.0 | 73.5 | 84.4 | 91.5 |
| Depreciation | (1.8) | (2.3) | (3.9) | (5.9) | (6.3) |
| EBIT | 19.2 | 34.8 | 69.5 | 78.5 | 85.1 |
| Net int income/(expense) | (1.1) | (0.8) | (4.4) | (5.0) | (5.1) |
| Associates’ contribution | 0.6 | (0.6) | 0.0 | 0.0 | 0.0 |
| Exceptional gain/(loss) | (0.5) | 1.3 | 0.0 | 0.0 | 0.0 |
| Pretax profit | 18.1 | 34.6 | 65.2 | 73.5 | 80.1 |
| Tax | (4.4) | (11.8) | (18.9) | (19.1) | (20.8) |
| Minority interest | (0.0) | (0.7) | (7.7) | (7.9) | (8.1) |
| Net profit | 13.7 | 22.0 | 38.5 | 46.5 | 51.2 |
| Core net profit | 14.3 | 20.8 | 38.5 | 46.5 | 51.2 |
Financial Ratios and Margins
| Y/E Dec (RMm) | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Revenue (%) | 26.9 | 28.0 | 91.5 | 6.7 | 9.1 |
| EBITDA (%) | 22.5 | 75.9 | 98.6 | 14.9 | 8.4 |
| Core net profit (%) | 47.1 | 45.7 | 85.5 | 20.6 | 10.1 |
| EBITDA margin (%) | 9.2 | 12.7 | 13.2 | 14.2 | 14.1 |
| PBT margin (%) | 8.0 | 11.9 | 11.7 | 12.4 | 12.3 |
| Core net profit margin (%) | 6.3 | 7.1 | 6.9 | 7.8 | 7.9 |
| Effective tax rate (%) | 24.2 | 34.1 | 29.0 | 26.0 | 26.0 |
| ROA (%) | 7.4 | 7.3 | 8.2 | 8.5 | 8.4 |
| Core ROE (%) | 10.7 | 14.1 | 21.7 | 21.1 | 19.0 |
| ROCE (%) | 12.5 | 19.4 | 26.9 | 22.9 | 21.2 |
| Dividend payout ratio (%) | 47.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Balance Sheet
| Y/E Dec (RMm) | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Fixed assets | 23.4 | 67.5 | 65.2 | 109.3 | 113.0 |
| Other long term assets | 12.8 | 61.4 | 89.2 | 87.0 | 69.3 |
| Total non-current assets | 36.3 | 129.0 | 154.4 | 196.3 | 182.3 |
| Cash and equivalents | 27.0 | 38.2 | 59.7 | 51.5 | 98.6 |
| Stocks | 24.9 | 94.1 | 87.9 | 92.8 | 101.3 |
| Debtors | 76.7 | 142.9 | 206.2 | 220.0 | 240.1 |
| Other current assets | 17.5 | 14.4 | 14.4 | 14.4 | 14.4 |
| Total current assets | 146.1 | 289.7 | 368.2 | 378.9 | 454.4 |
| Creditors | 29.1 | 82.3 | 107.6 | 113.7 | 124.1 |
| Short term borrowings | 1.8 | 39.5 | 39.5 | 39.5 | 39.5 |
| Other current liabilities | 11.2 | 42.8 | 42.8 | 42.8 | 42.8 |
| Total current liabilities | 42.1 | 164.5 | 189.9 | 196.0 | 206.4 |
| Long term borrowings | 3.2 | 52.6 | 92.6 | 92.6 | 92.6 |
| Other long term liabilities | 0.3 | 6.2 | 6.2 | 6.2 | 6.2 |
| Total long term liabilities | 3.5 | 58.7 | 98.7 | 98.7 | 98.7 |
| Minority interests | 0.1 | 36.7 | 36.7 | 36.7 | 36.7 |
| Shareholders’ Funds | 136.7 | 158.7 | 197.2 | 243.7 | 294.9 |
Liquidity & Capital Structure
| Y/E Dec (RMm) | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Current ratio (x) | 3.5 | 1.8 | 1.9 | 1.9 | 2.2 |
| Op. cash flow (RMm) | 26.6 | 15.1 | 18.6 | 47.6 | 47.5 |
| Free cashflow (RMm) | 25.9 | 5.9 | (21.4) | (2.4) | 37.5 |
| FCF/share (sen) | 4.1 | 4.2 | (3.3) | (0.4) | 5.8 |
| Debtors turnover (days) | 125.1 | 137.7 | 135.0 | 135.0 | 135.0 |
| Stock turnover (days) | 53.0 | 105.0 | 80.0 | 80.0 | 80.0 |
| Creditors turnover (days) | 61.4 | 98.3 | 98.0 | 98.0 | 98.0 |
| Net gearing (%) | -16% | 28% | 31% | 29% | 10% |
| Interest cover (x) | 13.3 | 26.9 | 14.6 | 14.2 | 15.4 |
Cash Flow Statement
| Y/E Dec (RMm) | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| PAT | 13.7 | 22.0 | 38.5 | 46.5 | 51.2 |
| Depreciation & Amortisation | 1.8 | 2.3 | 3.9 | 5.9 | 6.3 |
| Working capital changes | 6.2 | (49.1) | (31.7) | (12.7) | (18.1) |
| Others | 4.9 | 40.0 | 7.7 | 7.9 | 8.1 |
| Cashflow from operation | 26.6 | 15.1 | 18.6 | 47.6 | 47.5 |
| Capex | (0.7) | (9.3) | (40.0) | (50.0) | (10.0) |
| Disposal/(purchases) | 0.7 | 21.3 | 0.0 | 0.0 | 0.0 |
| Others | (0.6) | (88.9) | (6.7) | (15.4) | 0.0 |
| Cash flow from investing | (0.7) | (76.9) | (46.7) | (65.4) | (10.0) |
| Debt raised/(repaid) | (19.0) | 87.0 | 40.0 | 0.0 | 0.0 |
| Net interest income/(exp) | (1.1) | (0.8) | (4.4) | (5.0) | (5.1) |
| Dividends paid | (6.4) | (3.0) | 0.0 | 0.0 | 0.0 |
| Others | 10.4 | (11.0) | 14.0 | 14.6 | 14.7 |
| Cash flow from financing | (16.2) | 72.1 | 49.6 | 9.6 | 9.6 |
| Free Cash Flow | 25.9 | 5.9 | (21.4) | (2.4) | 37.5 |
Quarterly Profit & Loss
| Y/E Dec (RMm) | 1Q24 | 2Q24 | 3Q24 | 4Q24 | 1Q25 |
|---|---|---|---|---|---|
| Revenue | 57.6 | 56.6 | 82.6 | 94.3 | 150.3 |
| Op costs | (51.5) | (49.0) | (75.7) | (77.8) | (129.3) |
| EBITDA | 6.2 | 7.5 | 6.9 | 16.4 | 21.1 |
| Depn and amort | (0.5) | (0.5) | (0.5) | (0.7) | (1.5) |
| EBIT | 5.7 | 7.0 | 6.4 | 15.7 | 19.6 |
| Net int income/(exp) | (0.0) | 0.0 | (0.2) | (0.6) | (1.0) |
| Associates’ contribution | (0.1) | (0.6) | 0.1 | (0.1) | (0.0) |
| EI | 0.1 | 0.1 | 3.3 | (2.2) | 0.8 |
| Pretax profit | 5.7 | 6.6 | 9.6 | 12.8 | 19.4 |
| Tax | (1.9) | (1.9) | (3.3) | (4.7) | (5.6) |
| MI | 0.0 | 0.0 | 0.0 | -0.7 | -1.7 |
| Net profit | 3.8 | 4.6 | 6.3 | 7.4 | 12.1 |
| Core net profit | 3.7 | 4.6 | 3.0 | 9.6 | 11.3 |
Source: Company, Phillip Research forecasts
Contact Information (Regional Member Companies)
SINGAPORE
Phillip Securities Pte Ltd
250, North Bridge Road #06-00 Raffles City Tower, Singapore 179101
Tel: +65 6533 6001
MALAYSIA
Phillip Capital Sdn Bhd
B-18-6 Block B Level 18 Unit 6 Megan Avenue II, No.12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur
Tel: +603 2783 0300
HONG KONG
Phillip Securities (HK) Ltd
11/F United Centre 95 Queensway, Hong Kong
Tel: +852 2277 6600
JAPAN
Phillip Securities Japan, Ltd.
4-2 Nihonbashi Kabuto-cho Chuo-ku, Tokyo 103-0026
Tel: +81-3 3666 2101
INDONESIA
PT Phillip Securities Indonesia
ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A, Jakarta 10220
Tel: +62-21 5790 0800
CHINA
Phillip Financial Advisory (Shanghai) Co Ltd
No 550 Yan An East Road, Ocean Tower Unit 2318, Shanghai 200001
Tel: +86-21 5169 9200
THAILAND
Phillip Securities (Thailand) Public Co. Ltd
15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok 10500
Tel: +66-2 6351700
FRANCE
King & Shaxson Capital Limited
3rd Floor, 35 Rue de la Bienfaisance 75008 Paris
Tel: +33-1 45633100
UNITED KINGDOM
King & Shaxson Capital Limited
6th Floor, Candlewick House, 120 Cannon Street, London, EC4N 6AS
Tel: +44-20 7426 5950
UNITED STATES
Phillip Capital Inc
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Tel: +1-312 356 9000
AUSTRALIA
Phillip Capital Limited
Level 10, 330 Collins Street, Melbourne, Victoria 3000
Tel: +61-03 8633 9803
CAMBODIA
Phillip Bank Plc
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Tel: 855 (0) 7796 6151
INDIA
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Tel: +91-22-2300 2999
TURKEY
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DUBAI
Phillip Futures DMCC
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Tel: +971-4-3325052
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