HEGROUP: Strong Order Book and Data Centre Growth Drive Positive Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.51 (+41.7%) |
| Last Traded | RM0.36 |
| Recommendation |
The company’s prospects remain strong, driven by its successful penetration into the rapidly expanding data centre (DC) sector and a robust pipeline of related projects across Malaysia. This strategic entry has significantly strengthened its order book, underpinning a positive outlook for future earnings.
Order Book Bolstered by DC Segment
In the current year to date, contract wins amounted to RM97 million, predominantly from a major DC project secured earlier. As of September 25, the outstanding tender book stood at RM850 million, with DC projects constituting a significant 80% of this total. This substantial DC backlog is expected to be a primary anchor for earnings growth through 2026. The unbilled order book has also increased to RM90 million following the recent securing of a new power distribution system project for a medical client. The current order book is anticipated to be fully recognised by the first half of 2026.
Future Growth and Market Positioning
Looking beyond the dominant DC segment, activity in the semiconductor sector remains subdued, with a meaningful recovery projected only once customer capital expenditure resumes. However, the medical sector is showing nascent signs of reinvestment, with stronger project flows anticipated in 2026. Furthermore, the group identifies significant potential in the renewable energy (RE) sector. It is actively pursuing opportunities in solar farm infrastructure and aims for greater involvement in battery energy storage system (BESS) projects. The company’s recent approval for its Main Market transfer on November 14 is set to enhance its visibility and strategic positioning for larger-scale project bids.
Outlook and Investment Recommendation
Notwithstanding expectations of a softer sequential earnings performance in the fourth quarter of 2025, the outlook for 2026 remains positive. This is supported by a robust pipeline of opportunities across the DC, medical, and RE segments. The stock continues to be viewed as attractive, notably underpinned by a forecasted 34% EPS growth for 2026. Key risks include slower-than-expected order book replenishment, unforeseen project delays, and potential margin pressures.
In light of these factors, the investment bank maintains its BUY recommendation with a 12-month target price of RM0.51, based on a target PE of 14x on 2026E EPS.
