CBHB: Engineering Firm Exceeds Profit Expectations on Operational Efficiencies, Positive Outlook Maintained

An engineering firm specializing in electricity supply distribution systems reported a significant surge in its third-quarter core net profit, largely driven by strategic cost efficiencies and a healthier project mix. Despite a notable decline in revenue for the quarter, the company’s profitability exceeded expectations, with analysts reiterating a positive long-term outlook.

Performance Review

For the third quarter of fiscal year 2025 (3QFY25), the company recorded a robust 43.8% year-on-year increase in core net profit, reaching RM12.5 million. This strong performance was primarily attributed to the reversal of expected credit loss (ECL) provisions on trade receivables and contract assets, coupled with improved cost management. The pre-tax margin, excluding this impact, would still normalize from 43.9% to 22.7%, a 1.0 percentage point increase year-on-year, highlighting operational improvements.

However, 3QFY25 revenue experienced a 25.3% year-on-year decrease to RM31.5 million. This revenue dip was a result of several mechanical and electrical (M&E) systems projects reaching their tail ends, alongside slower contributions from newly secured contracts which are still in their early stages of execution. The M&E systems segment continued to be the main revenue contributor, accounting for over 99% of the total revenue.

Cumulatively, the nine-month FY25 earnings came in below internal expectations (66% and 70% of full-year forecasts, respectively) but were within consensus estimates. This slight discrepancy was due to the timing of project completions and the early execution phases of newer projects.

Future Outlook

The company maintains a positive outlook on its growth prospects, underpinned by a healthy tender pipeline and favorable sector tailwinds. The burgeoning data center (DC) ecosystem in Malaysia, fueled by major hyperscalers like Google and Microsoft making significant land acquisitions, is expected to be a key growth driver. These private-sector investments are complemented by public initiatives, including the proposed Sovereign AI Cloud and national AI research centers, positioning the firm strategically to benefit from these developments.

Furthermore, the government’s increasing focus on East Malaysia, with Sabah and Sarawak slated to receive substantial federal allocations in 2026, presents additional opportunities. The company is actively exploring partnerships and local engagement to capitalize on this expected infrastructure development. As of 3QFY25, the outstanding orderbook stood at RM532.3 million, with a tender book of RM730 million, of which 92% and 80% are DC-related projects. Analysts anticipate stronger orderbook recognition in the upcoming quarters.