PETALING JAYA: HE Group Bhd
’s latest RM47mil data centre (DC) contract, marking its maiden 275-kilovolt overhead interconnection job, could contribute RM3mil in profit and potentially serve as a springboard for broader DC opportunities, according to Phillip Capital Research.
The group announced it had accepted a letter of intent for the supply and installation of electrical works for a DC in Johor, with the formal contract set to be finalised and executed by the third quarter of 2026 (3Q26).
Phillip Capital has assumed a 7% margin for the project.
It added that the contract could provide further impetus for HE Group to broaden its presence in the higher-voltage electrical infrastructure by acting as reference for a wider pool of DC jobs.
“We also see potential for follow-on mechanical, electrical, and plumbing fitout works at the same data centre in 2027.”
The research house noted that the DC segment now makes up 45% of HE Group’s total order book, which has risen to a record high of RM300mil after it secured RM280mil in year-to-date contract wins.
Phillip Capital sees upside to its previous replenishment assumptions, backed by the group’s RM1bil tender book and strong remaining order flow across DCs and semiconductors.
Its order replenishment target for the financial year 2026 (FY26), FY27, and FY28 has consequently been revised to RM400mil, RM350mil, and RM350mil, respectively, up from RM300mil, RM250mil, and RM300mil previously.
It also raised the FY26 to FY28 earnings per share forecast by 6% to 25% on the back of higher order wins and faster revenue recognition.
The research house has maintained a “buy” rating on HE Group, and raised the 12-month target price to RM1 from 73 sen previously. The new target price is based on a higher 18 times multiple of 2027 forward earnings per share, compared to the previous 16 times.
“We believe the higher price-to-earnings (PE) multiple is warranted by strong order visibility and a three-year earnings compound annual growth rate of 36%.”
Phillip Capital added that the group’s current valuation – trading at 12 times forward PE – has yet to fully price in its earnings turnaround, while flagging further positive newsflow as a potential re-rating catalyst.
