PETALING JAYA: HE Group Bhd
's future growth may be supported by potential contract wins from its RM475mil tender book
The new wins will be largely driven by data centres and semiconductors, which comprise 70% and 30% of its tender book, respectively, analysts said.
The group, a provider electrical engineering services, also had an order book of RM98mil as of last December, said Phillip Capital Research.
The research house introduced its 2027 earnings per share (EPS) forecasts for HE Group, with growth underpinned by promising prospects in the data centre and semiconductor sectors.
Phillip Capital Research said, at an undemanding valuation of 9.5 times this year’s EPS, the current share price presents an attractive opportunity for investors to position themselves for structural multi-year growth themes.
The research house maintained a “buy” rating on the stock with a target price of 84 sen a share based on a 20 times multiple on its EPS for this year.
The stock closed at 40 sen a share in yesterday’s trading.
Phillip Capital Research said key risks to its call include slower-than-expected order book replenishment, unforeseen project delays and cost overruns.
For last year, revenue grew 1.3% year-on-year (y-o-y) to RM206.9mil, driven by stronger electrical equipment hook-ups and retrofitting services (408% y-o-y) supported by higher semiconductor activities.
This offset the weaker revenue from power distribution which was down 14% y-o-y and other building systems work which was down 37% y-o-y.
The research house said core net profit grew 48% y-o-y to RM16mil last year on the back of earnings before interest, taxes depreciation and amortisation (Ebitda) margin expansion of 2.5 percentage points.
This was based on a favourable project mix, driven by higher electrical equipment hook-ups and retrofitting work.
The Ebitda margin improved to 12% (up 0.9 percentage points) primarily due to front-loaded cost recognised in the third quarter 2024 for certain electrical equipment hook-ups and retrofitting work, said Phillip Capital Research.
“Malaysia’s pro-investment policies, alongside the establishment of the Johor-Singapore Special Economic Zone, are expected to drive further expansion in the industrial sector. In line with this, we are enhancing our capabilities beyond electrical engineering to include mechanical and process utility engineering, positioning the group for long-term growth,” HEG’s managing director Haw Chee Seng said in a statement earlier this week.
