T7GLOBAL: Positive Outlook for Energy Segment Drives Maintained Buy Rating

Analysts are maintaining a “BUY” recommendation for the company, citing the robust performance expected from its energy segment and a healthy order book that promises long-term earnings visibility. While the industrial solutions segment faces ongoing challenges, the overall outlook remains positive, underpinned by strategic growth initiatives.

Performance & Segment Review

The energy segment is poised to be the primary driver of the group’s performance, buoyed by strong asset reliability and a healthy contract pipeline. Its Mobile Offshore Production Units (MOPUs) have sustained impressive uptime rates of 99.7% and 99.0%, ensuring stable and recurring income. Furthermore, the jack-up rig has operated at near full capacity, successfully completing 13 wells in the first half of the year. A significant catalyst for the second half of 2025 is the ramp-up of Pan-Malaysia maintenance, construction, and modification (MCM) packages, which commenced contributions in May 2025. Management projects these MCM packages to contribute approximately RM300 million in revenue for 2025, a substantial increase from RM165 million in 2024.

In contrast, the industrial solutions segment continues to face a muted outlook for the second half of 2025. This segment is grappling with project delays and reduced activity within its Specialist Products and Technology (SPT) division. Notably, the KLIA Baggage Handling System (BHS) project is experiencing execution challenges, with discussions underway concerning an Extension of Time (EOT) and work resequencing. Despite these setbacks, steady progress has been noted on other key industrial projects, including the delivery of 70% of smart meters to Tenaga Nasional Berhad (TNB) and 43% completion of the ASR radar replacement program. To mitigate the slower pace of revenue recognition, the company is actively pursuing new tender opportunities.

Future Outlook & Risks

The company’s long-term earnings visibility is supported by a healthy RM4.2 billion order book, with the energy segment accounting for 90% and industrial solutions for 10%. To counteract the slower pace of revenue recognition in its industrial segment, the company is actively pursuing new tender opportunities, particularly within TNB’s smart metering rollout and other high-value infrastructure initiatives. Key risks identified include potential lower-than-expected new work orders, unforeseen delays in the BHS project, and higher-than-expected operating costs.

Given the strong prospects in the energy sector and a substantial order book, analysts reiterate their “BUY” rating, underscoring confidence in the company’s ability to navigate current industrial headwinds and deliver future growth.