PETALING JAYA: Mechanical and electrical engineering services outfit CBH Engineering Holding Bhd may see earnings momentum accelerate from the second quarter ended June 30, 2026 (2Q26), as approximately RM600mil of the company’s outstanding order book is recognised, says TA Research.
The research house, which has kept a “buy” call on the stock and raised the target price to 89 sen from 80 sen, said earnings would accelerate from 2Q26 onwards driven by a higher order book burn rate and accelerating earnings conversion for the financial year ending Dec 31, 2026 (FY26).
It projected the company’s order book to be replenished at a faster pace following the RM57.4mil in projects that have been secured as consistent with the historical pattern of winning a larger proportion of the jobs in the second half of the year.
It expects the company to win RM600mil in new jobs for FY26 underpinned by a tender book of RM1.3bil, of which more than 70% comprises data centre- or (DC)-related projects.
“Assuming a conservative tender conversion rate of 40%, the current tender book alone could translate into approximately RM520mil of potential new job wins.
“More importantly, the RM1.3bil tender book comprises only projects at the formal tender stage, indicating further encouraging new job win visibility,” it added.
It noted that CBH’s management had reiterated that the recent increase in construction costs remains manageable and does not expect any material impact on project profitability, maintaining a net margin guidance of 10% to 15%.
It believes this target can be achieved due to normalising building material prices to near pre-war levels, reduced supply chain disruptions and the company’s continued focus on procurement discipline, cost optimisation and operational efficiency.
“Its healthy project mix and disciplined tender selection should provide further support in preserving margins despite a gradually inflationary operating environment.”
It said rerating potential remains after the stock delivered a 38.8% year-to-date share price gain based on last Friday’s closing price of 68 sen.
The stock trades at only 15.3 times 2027 price-to-earnings (PE) based on FY27 earnings forecast of RM88.3mil, which represents a discount to its closest peer, MN Holdings Bhd
. MN Holdings trades at a 20.4 times forward PE, an unjustified valuation gap given CBH’s superior double-digit net margin profile, healthy earnings visibility and more attractive dividend yield.
