CBHB: M&E Engineering Firm Positioned for Strong Growth Driven by Data Centre Boom
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
TA SECURITIES has initiated coverage on a prominent engineering firm with a “BUY” recommendation, setting a target price of RM0.54, implying a significant upside of 22.6% from its last traded price of RM0.44. The positive outlook is primarily driven by the company’s robust outstanding order book and its strategic positioning to capitalize on the booming data centre market.
Strong Performance and Strategic Focus
The company has demonstrated remarkable revenue growth, surging from RM180.1 million in FY22 to RM271.7 million in FY24. This strong performance is attributed to its specialized mechanical and electrical (M&E) solutions, particularly in meeting the soaring demand from data centre projects. Furthermore, effective cost control measures have bolstered its net margin, which increased from 11.1% in FY22 to 15.4% in FY24, leading to a substantial rise in core net profit from RM22.0 million to RM45.5 million over the same period. The firm’s integrated design-and-build capabilities ensure efficient execution and high-quality outcomes, enhancing client trust and repeat business.
Future Outlook and Risks
Looking ahead, TA SECURITIES forecasts a temporary revenue contraction of 1.2% in FY25, mainly due to slower progress billings stemming from delays in securing new jobs in the second half of FY25. However, a strong rebound is projected for FY26F and FY27F, with topline growth of 32.6% and 25.0% year-on-year respectively. This growth is underpinned by an impressive outstanding order book of RM533.3 million as of September 2025 and an annual order book replenishment target of RM450.0 million for FY26-27F. Core earnings are expected to follow a similar trajectory, declining 11.4% in FY25 before recovering sharply by 32.6% and 25.0% in FY26F and FY27F, reaching RM40.3 million, RM53.4 million, and RM66.8 million respectively. The firm’s deep expertise in high-voltage substations and mission-critical power infrastructure aligns perfectly with the unprecedented demand from AI-driven data centres, which require significantly higher power capacities and resilient electrical systems. The company also maintains a strong net cash position of RM146.1 million, providing ample financial flexibility.
Despite the promising outlook, key risks include slower-than-expected order book replenishment and potential fluctuations in construction costs. Management has indicated that the company does not intend to declare dividends in the near foreseeable future, opting instead to conserve cash for upcoming project capital requirements and to strengthen its balance sheet for high-return initiatives.
Valuation and Recommendation
TA SECURITIES’ valuation benchmarks the company against peers with similar operations and market exposures, assigning a target P/E multiple of 19x. This represents a 20% premium, justified by the firm’s comparable clientele with robust double-digit net margins, a solid order book replenishment pipeline, and a relatively higher Return on Equity (ROE). The firm has also been assigned a three-star (★★★) ESG rating, reflecting adequate efforts in meeting environmental, social, and governance requirements for long-term value creation. Based on these factors, TA SECURITIES has initiated coverage with a BUY recommendation, highlighting the firm as an attractive growth-centric small-cap construction play.
