| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A prominent construction company is poised for continued positive momentum, with analysts anticipating its 3QFY26 core net earnings to fall within the RM35-RM40mn range. This performance is expected to be broadly in line with market expectations, driven by historically stronger final quarters where peak progress billings align with construction project execution S-curves. Investment bank TA SECURITIES has reiterated its “BUY” recommendation and raised its target price to RM2.85, reflecting confidence in the company’s robust outlook.
Robust Order Book and Pipeline
The company has demonstrated strong progress in new job acquisitions, with year-to-date wins totaling approximately RM2.0bn. This brings its total outstanding order book to a substantial RM5.1bn, providing a solid 3.3x cover against its FY26F revenue forecast. Despite current new order book replenishment accounting for about 50% of the FY26F assumption of RM4.0bn, management is believed to be well on track to secure the remaining balance in the coming months.
A robust pipeline of prospective projects further underpins this positive view. This includes an estimated RM2.0bn opportunity from recurring clients Exsim and Maxim for upcoming high-rise residential projects in Johor (combined estimated value of RM3.3bn), alongside RM200-RM300mn from LSS5-related solar projects. The company is also actively tendering for external residential projects worth approximately RM500mn. These opportunities collectively reinforce confidence in the company’s ability to sustain its strong order book momentum through FY26.
Navigating Margin Dynamics
While the company is expected to maintain a healthy Profit After Tax (PAT) margin in the range of 7-8% in coming quarters, this marks a contraction compared to 9-10% in 3QFY25. This easing is attributed to the acceleration of progress on its RM1.43bn data centre project pipeline (with an estimated RM1.1bn outstanding), which inherently carries lower margins and shorter construction cycles. The blended profitability is also being influenced by a shift in its order book towards EPCC-driven contracts, including major sewage treatment plants and a solar and battery EPCC package, which typically offer thinner margins than its traditional building jobs. Despite these dynamics, the group’s profitability remains well-supported by steady execution across a diversified and expanding order book portfolio.
Enhanced Shareholder Returns
Given the company’s solid earnings visibility, multi-year growth trajectory (3-year projected core earnings CAGR of 38.9%), and robust order book replenishment prospects, TA SECURITIES sees room for a higher dividend payout. The investment bank has revised its dividend forecasts to 6 sen, 9 sen, and 9 sen per share for FY26, FY27, and FY28 respectively, significantly up from earlier projections based on a 30% dividend payout policy. These updated assumptions suggest an appealing forward dividend yield of 2.9%, 4.4%, and 4.4% for FY26, FY27, and FY28, strengthening the total shareholder return profile.
Valuation and Outlook
TA SECURITIES reiterates its “BUY” call with a revised Target Price of RM2.85, premised on a 17x P/E multiple. The investment bank continues to favor the company for several key reasons: its long-standing relationships with major clients ensuring steady project flow, its strategic positioning as a key beneficiary of the property and construction upcycle, and its robust earnings visibility and growth prospects supported by a resilient and expanding order book. The earnings forecast remains unchanged for now, pending the release of the upcoming 3QFY26 results.
