03-06-2025
HE Group holds RM990mil in tenders despite market slump
PETALING JAYA: Despite HE Group Bhd 's results being in line with expectations, Phillip Capital Research is cutting its forecast of the company's earnings to account for lower order book replenishment amid a prolonged semiconductor market downturn.
The research house said the mechanical, electrical and process contractor's tender book remains healthy at RM990mil, primarily consisting of data centres (80%) and utility-infrastructure (12%) projects.
'However, the timing of contract awards remains the biggest uncertainty, with management guiding for the third quarter of this year (3Q25).
'Given the continued delay in project awards, we revise our 2026 to 2027 order book replenishment forecast to between RM200mil and RM250mil (from between RM250mil and RM300mil) and cut earnings forecasts by between 12% and 15%,' the research house added.
HE Group is an electrical engineering service provider focusing on power distribution systems for end-user premises such as industrial plants and industrial and commercial substations.
The group recorded 1Q25 core net profit of RM2.9mil, while revenue declined by 51% year-on-year to RM32mil, weighed down by the power distribution and building systems segments.
This mitigated the stronger performance from its electrical equipment hook-up and retrofitting services.
'The 1Q25 earnings before interest, tax, depreciation and amortisation margin improved 3.6 percentage points, attributable to a more favourable revenue mix from the higher-margin electrical equipment hook-up and retrofitting segment.
'Overall, 1Q25 results were in line with our expectations, accounting for 24% of our full-year forecasts for this year,' Phillip Capital Research said.
The research house said it was raising its 12-month target price to 45 sen pfrom 44 sen after rolling forward its valuation horizon and slashing the target price-earnings (PE) multiple to 12 times from the previous 16 times.
'The lower PE multiple reflects a more cautious view, taking into consideration the softer market sentiment, and is in line with small and mid-cap valuations.
'Despite the absence of a near-term catalyst, the stock is trading below minus one standard deviation since listing,' the research house said.
Phillip Capital Research maintained its 'buy' rating on the stock.
'Key risks include slower-than-expected order book replenishment, unforeseen project delays, and cost overruns,' the research house said.
