PETALING JAYA: Nationgate Holdings Bhd
is expected to see stronger earnings growth over the next three years as rising artificial intelligence (AI) infrastructure spending and a new optical transceiver manufacturing business drive its expansion into higher-value data centre (DC) components.
The company’s earnings growth could accelerate from financial year 2027 (FY27) as production ramps up at its new optical transceiver facilities, supported by orders from key US customers and growing demand for advanced optical networking components.
CIMB Research has initiated coverage on Nationgate with a “buy” call and a sum-of-the-parts target price of RM2.70, implying a forward price-to-earnings ratio of 22 times based on FY28 forecasts.
The research house said Nationgate is strategically positioned to benefit from the multi-year investment cycle in AI infrastructure, given its established capabilities in AI server assembly, data computing solutions and optoelectronic manufacturing.
“As one of a select few manufacturers with established capabilities in AI server assembly, data computing solutions, and optoelectronic manufacturing, the company sits directly within the supply chain supporting hyperscale DC expansion,” it explained.
CIMB Research expects demand for advanced optical components to increase materially as AI server deployments expand and networking bottlenecks become more pronounced.
Nationgate’s established relationships with key customers in the data computing ecosystem should also help it capture a larger share of the value generated by the AI infrastructure supply chain.
The research house’s positive outlook on Nationgate is underpinned by its expectation of a 60.5% compound annual growth rate in core net profit between FY25 and FY28, outpacing the estimated 28.7% growth for its closest peer, Fabrinet, and the 42% average for domestic electronics manufacturing services companies.
CIMB Research’s target price represents a 63% premium to Fabrinet’s valuation of 13 times earnings, reflecting Nationgate’s stronger projected earnings growth and its exposure to expanding AI-driven optical networking infrastructure.
The optical transceiver business is expected to become a key earnings driver, following orders secured from major US customers in late 2025.
The venture also highlights the company’s ability to benefit from supply chain diversification away from China.
“Importantly, both Nationgate’s purpose-built production facilities (Plant 11A and 11B) have been fully committed by key customers, under terms that require customers to compensate Nationgate for any unused capacity,” CIMB Research highlighted.
It added that this provides strong earnings visibility and supports its expectation that the optical transceiver business will become a key earnings growth driver as production ramps up from FY27.
The wider investment cycle offers another source of growth, CIMB Research said, pointing to Bloomberg’s estimates that combined capital expenditure by the five largest US hyperscale cloud and AI infrastructure providers could reach US$729.2bil (RM2.98 trillion) in 2026, up 93% year-on-year from US$378.7bil in 2025.
“We anticipate further upside to the estimate as AI has become a strategic priority for governments, enterprises, and technology leaders globally, prompting sustained investments in networking infrastructure.”
