PETALING JAYA: ACE Market-listed Southern Score Builders Bhd
(SSBB) is poised to secure higher value jobs following its acquisition of a 51% stake in SJEE Engineering Sdn Bhd, which currently has eight data centre (DC) projects in hand.
These higher-value construction works include hospitals, DCs and pharmaceutical factories, with the added capability to integrate both construction and mechanical and electrical (M&E) services.
“The acquisition of a 51% stake in SJEE in January pushes the group up the value-added scale towards higher margin M&E jobs.
“SJEE offers electrical engineering services and its focus has shifted in recent years towards DCs,” Maybank Investment Bank Research (Maybank IB) said.
The research house noted that the company, which has proposed a transfer to the Main Board, is currently tendering for RM450mil worth of DC jobs, all promoted by US-related companies.
SSBB has completed six DC jobs and was recently awarded its eighth, a RM51mil contract from Gamuda Engineering Sdn Bhd.
The acquisition comes with a profit guarantee, whereby SJEE is expected to achieve a cumulative profit after tax of not less than RM15mil over three financial years.
SJEE specialises in power distribution systems for industrial plants, commercial buildings, and other end-user premises.
According to Maybank IB, the company’s focus has shifted in recent years towards DCs, with SJEE involved in handling the cable infrastructure management of such facilities.
“With over 14 years of providing construction management services, what differentiates SSBB from most of its construction peers is that it takes on projects both as a turnkey contractor and main contractor, with the former offering higher margins,” the research house added.
It highlighted that SSBB recorded operating and net profit margins of 31% and 23%, respectively, in the first half of financial year 2025 (FY25), significantly above the peer average of 7.5% and 4.8%.
The research house added that SSBB’s outstanding order book stood at RM1.3bil as at end-2024, with a tender book of RM500mil and another RM500mil under direct negotiation.
Maybank IB projected that if SSBB recognises construction revenue over three years and SJEE delivers on its RM150mil order book, total revenue and net profit for FY26 could reach RM482mil and RM71mil, respectively.
This translates to a prospective FY26 price-to-earnings ratio of 15 times, compared to the construction sector’s average of 13.6 times, the research house added.
“Factors to consider would be its better margins, higher return on equity (21% in FY24 versus industry’s 4%) and exposure to the higher end DC market.
“The estimated FY26 net profit of RM71mil would represent a 91% growth over FY25’s annualised net profit of RM37mil,” the research house said.
