PETALING JAYA: Southern Score Builders Bhd
is expected to deliver a strong 46% net profit compounded annual growth rate over financial year 2024 (FY24) to FY27.
This is supported by a RM1.3bil order book, recurring job flows from both prominent developers and a growing footprint in the data centre (DC) space.
Phillip Research initiated coverage on the stock with a “buy” rating and target price of 75 sen a share, based on 18 times FY27 earnings per share.
The shares were last traded at 60 sen.
While the group’s current involvement in DC projects is primarily concentrated in the power distribution segment, Phillip sees potential for the group to move up the value chain as a turnkey contractor.
This would allow deeper participation in Malaysia’s fast-expanding DC development pipeline, reinforcing its view of a sustained valuation rerating.
Among the key downside risks cited by the research house are slower-than-expected order book replenishment, unforeseen project cost overruns and delays.
Southern Score has also consistently declared one sen dividend per share (DPS) since FY23, with a payout ratio of 60% to 90%.
Phillip projects DPS to rise to two sen from FY26 onwards, translating to a 50% to 60% dividend payout ratio and a dividend yield of 3%.
The group offers end-to-end turnkey solutions from project planning, design coordination and construction execution, suited to serve emerging landowners and developers lacking in-house delivery capabilities.
Southern Score’s close affiliation with Platinum Victory (PV) and Radium Development Bhd, has supported a steady pipeline of recurring projects and strengthened long-term order book visibility.
Since FY19, the group has secured over RM2bil worth of projects from PV, or about 50% of PV’s total awards.
With PV holding over 200 acres of land across prime Klang Valley locations, including Setapak, Cheras, Ampang, Sungai Besi and Mont Kiara, its RM20bil gross development value pipeline supports a consistent RM1.5bil to RM2bil annual launch cadence over the next decade.
This translates to roughly RM1bil in annual construction opportunities, or RM5bil cumulatively over the next five years, based on Southern Score’s existing wallet share.
Southern Score recently secured a RM78mil contract for detention pond upgrading works from Radium, marking its maiden job win from this related-party developer.
This maiden contract signals the start of a potentially recurring project flow from Radium, as Radium is ramping up its landbanking efforts in Klang Valley.
Phillip estimated these developments could translate into RM2bil worth of construction opportunities over the near-term, offering meaningful upside as Southern Score expands its footprint across the extended group.
