BERHAD: Strategic Project Win Boosts Outlook, Rating Upgraded
| Investment Bank | PUBLIC INVESTMENT BANK |
|---|---|
| TP (Target Price) | RM0.46 (+17.95%) |
| Last Traded | RM0.39 |
| Recommendation |
A leading electrical engineering service provider has seen its prospects significantly improve following a pivotal data centre (DC) project win in Cyberjaya. This strategic contract marks a significant entry into the high-growth DC industry, which is characterized by higher-margin opportunities and quicker project turnarounds.
The group’s outstanding order book has consequently surged to RM106.3 million, achieving its FY25 replenishment target of RM50 million. Management aims to secure an additional RM50 million by the end of FY25. Furthermore, the total tender book stands at RM700 million, with approximately 80% related to DC projects, underscoring the company’s intensified focus on expanding within this segment.
Project Details and Financial Impact
The Cyberjaya project, valued at RM56.7 million, involves providing power distribution system works and is slated for completion by April 2026. While power distribution typically offers lower margins, DC-related contracts are noted for their relatively higher margins due to tighter delivery timelines. The project has already commenced and is progressing as planned, contributing positively to the company’s near-term earnings visibility.
Future Outlook and Recommendation
In light of the stronger order book and brighter prospects, Public Investment Bank has upgraded its earnings forecasts for FY25-27 by an average of 7%. Consequently, the investment bank has revised its call on the company from Neutral to Outperform, with a higher target price of RM0.46, based on an estimated 14x FY26F EPS.
The positive outlook is further supported by the company’s substantial tender book, heavily skewed towards DC projects. The rapid expansion of Malaysia’s DC industry is expected to drive demand for advanced semiconductor chips, creating valuable synergies with the company’s well-established positions in both critical sectors. To maintain margin resilience, the group actively manages its exposure to copper price fluctuations, as power cables and wires constitute key raw materials.
