PETALING JAYA: CGS International (CGSI) Research has initiated coverage on ISF Group Bhd with an “add” recommendation and a target price of 80 sen, citing the group’s exposure to the data centre (DC) infrastructure build-out and strong earnings growth prospects.
It said ISF’s niche lies in providing end-to-end piping system solutions for water utilities, cooling and sewerage infrastructure required by DCs, differentiating it from other mechanical and electrical or mechanical, electrical and plumbing contractors.
“ISF is not a pipe manufacturer,” the research house noted, adding that the group integrates engineering design, procurement, installation, testing and commissioning for piping systems.
While acknowledging other equally credible selected peers with DC exposure, CGSI Research said ISF is a standalone niche alternative that benefits from the DC piping systems value chain.
“Based on our assessment, ISF provides a highly differentiated, high barrier-to-entry option into the DC infrastructure upcycle given its position as a pure play in fluid infrastructure, external water networks and advanced sewerage systems,” it noted.
Following its initial public offering in January 2026, CGSI Research said ISF’s outstanding order book expanded 32% to RM159.4mil as at the end of June, equivalent to 1.6 times its financial year 2025 (FY25) revenue.
About a quarter of the order book comprises DC projects, with the proportion expected to increase going forward.
“Its DC proportion to order book is likely to rise, as 60% of its all-time high RM509.3mil tender book as at the end of June 2026 comprises high-value and higher margin DC packages,” it said.
CGSI Research said the group is targeting up to RM150mil in annual contract replenishment.
“With RM47mil worth of total announced wins year-to-date (four residential and two DC, of which one is for a hyperscale DC), we believe ISF remains on track for a revival in contract flows in 2H26 and substantial growth in DC revenue in FY26,” it added.
The research house said that ISF’s strong presence in Johor, which accounted for 71% of FY25 revenue and 76% of first quarter FY26 revenue, positions it to benefit from continued DC investments as well as spillover opportunities from the Johor-Singapore Special Economic Zone.
Overall, it forecasts a three-year net profit compound annual growth rate of 25.3%.
Following the coverage initiation yesterday, ISF shares rose six and a half sen, or 11.5%, to 63 sen.
