PETALING JAYA: HE Group Bhd
’s revenue is expected to fall 30% year-on-year in financial year (FY25) before picking up 17% and 18% in FY26 and FY27, respectively, says Maybank Investment Bank Research (Maybank IB).
It will be led by the fulfilment/completion of projects secured from prior years and back-loading of new orders as a result of the tariff uncertainties.
It is also expected to increase its annual order book replenishment from semiconductor and data centre (DC) jobs, Maybank IB said.
The research house pencilled in an order book replenishment assumption of RM80mil in FY25 and RM200mil per annum over FY26 to FY27.
This is premised on robust replenishment prospects across the semiconductor, medical and DC industries.
Its assumptions are backed by HE Group’s sizeable RM700mil tender book.
Maybank IB believes the group’s balance sheet is healthy with a net cash of RM55.5mil (cash balance of RM58.1mil less RM2.6mil borrowings), as at end-June 2025.
This is equivalent to 13 sen a share.
Based on its projections, the research house expects the group to remain in a net cash position by end-FY27.
Maybank IB applies a target price earnings ratio (PER) of 15 times, in line with the sector peer average.
Based on its FY26 earnings per share (EPS) of 3.2 sen, this translates to a target price (TP) of 48 sen a share.
The research house has initiated coverage on the group with a “buy” call.
Phillip Capital Research, meanwhile, is maintaining its “buy” call with an unchanged TP of 51 sen a share, pegged to a target 14 times PER multiple on 2026 EPS.
The potential contract win newsflow in the second half of FY25 could act as a catalyst for share price re-rating.
The key risks to its “buy” call include slower-than-expected order book replenishment, unforeseen project delays, and cost overruns
Maybank IB added that the group does not have a dividend policy, and management is not guiding for any dividend over the next few years, as the group would require financial resources to bid for future projects, as tenders would require performance bonds and warranty bonds.
Maybank IB’s financial modelling assumes zero payout from FY25 to FY27 earnings.
The group derives its key revenue stream from the semiconductor cluster, which accounted for 94% of FY24 revenue.
The group’s outstanding order book of RM49mil consisting mainly of projects within the semiconductor industry, is expected to support earnings in the medium term.
Its tender book, however, is now 70% skewed towards DC-related jobs and stands at RM700mil.
Maybank IB believes the group can comfortably move into this adjacency because DCs generally require the same power management systems that fall within medium voltage grades and below.
Meanwhile, HE Group in a note on its latest financial results, which it announced on Monday, said it will focus on projects that provide sustainable margins and that meet its internal benchmarks for commercial viability.
“This ensures prudent allocatioin of resources, safeguarding long-term shareholder value. While the board remains conscious of prevailing macroeconomic uncertainties and industry challenges, we are encouraged by the structural growth trends underpinning our markets.”
