PETALING JAYA: Critical Holdings Bhd
is entering a structurally higher earnings and growth trajectory as it transitions from a specialist mechanical, electrical and process-utility contractor into a full-fledged engineering, procurement, construction and commissioning (EPCC) player, according to MBSB Research.
The research house, which initiated coverage on the company with a “buy” recommendation and target price (TP) of RM2.94, said the group’s sizeable projects over the next two years, coupled with the potential to establish a track record for larger EPCC opportunities, warranted a re-rating beyond its historical valuation range.
The TP represents a 39.3% potential upside from Critical’s share price of RM2.11 as at Aug 14, with an expected total return of 41.2%.
MBSB Research based its valuation on a 16.7 times price-to-earnings ratio, or two standard deviations above the group’s three-year mean, pegging it to FY28 forecast earnings per share of 17.6 sen.
At the centre of the bullish outlook is Critical’s record RM1.06bil order book, lifted by a RM772.5mil EPCC contract secured in June for an industrial facility incorporating an automated storage and retrieval system warehouse in Kulim Hi-Tech Park.
The contract, together with a RM152.6mil cleanroom EPC project secured in May, provides earnings visibility through FY28.
MBSB Research expects FY27 to mark the group’s earnings inflection, with revenue projected to almost triple to RM758.5mil from RM271.8mil in FY26, while core earnings are forecast to surge 2.7 times to RM59mil from RM22.1mil.
The brokerage said moving into larger EPCC scopes allows Critical to capture more client spending and bid for higher-value contracts.
The group’s asset-light model is another positive, with growth constrained mainly by engineering and project-management capacity rather than physical assets.
