SSB8: Construction Firm Delivers Strong Start to Fiscal Year, Earnings Exceed Expectations on Strategic Growth and Cost Control

A construction firm has reported a robust start to its new fiscal year, with first-quarter core net earnings surpassing both analyst and consensus estimates. The strong performance, primarily driven by strategic acquisitions and effective cost management, positions the company for continued growth, despite a slight quarter-on-quarter moderation in profitability.

Performance Review

For the first quarter of fiscal year 2026 (IQFY26), the company recorded core net earnings of RM11.4 million, representing 14.7% and 15.1% of the full-year estimates by the investment bank and market consensus, respectively. This performance is largely attributed to significant year-on-year revenue growth of 112.5%, bolstered by the contribution from a recently acquired 51%-owned subsidiary, SJEE Engineering Sdn Bhd, and an accelerated order book burn rate. Profit Before Tax (PBT) also saw a substantial increase of 152.7%, benefiting from a one-off RM2.1 million recovery of bad debt and RM1.4 million in liquidated ascertained damages income.

On a quarter-on-quarter basis, core net profit slightly contracted by 0.8%. This marginal dip was mainly due to a higher effective tax rate, which offset the positive impact of improved gross profit margins, lower administrative expenses, and reduced interest costs. No interim dividend was declared for the quarter.

Future Outlook and Growth Drivers

The company maintains a strong near-term earnings visibility, underpinned by an outstanding order book of RM1.46 billion as of end-September 2025, which provides a robust 2.5x cover of its FY26 revenue forecast. Year-to-date new job wins totaled RM122 million, representing 12.2% of its RM1 billion order book replenishment assumption. Management is confident in meeting its replenishment targets in coming quarters, supported by upcoming in-house property project launches (Platinum Victory and Radium, targeting RM1 billion in annual Gross Development Value each) and a substantial M&E related tender pipeline of RM384 million under SJEE.

The firm is well-positioned to benefit from the sustained strength in the domestic property market and the increasing demand for M&E works driven by the expanding data centre project pipeline.

Investment Bank’s View

The investment bank deems the IQFY26 results to be in-line with expectations and has maintained its earnings forecast. The “BUY” recommendation is reiterated, with a target price of RM0.25, citing strong earnings visibility from a robust unbilled order book, strategic synergies with key property developers, exposure to the high-growth data centre sector, and consistent double-digit net margins.