UUE Holdings Bhd - Secured RM28.1m Contract for Singapore Operations
Mon, 14-Apr-2025 06:28 am
by Tan Sue Wen • Apex Research

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UUE (0310)

Target Price (RM)

1.10

Recommendation

Buy

Secured RM28.1m Contract. UUE’s wholly owned subsidiary, Konnection Engineering, has secured a contract valued at RM28.1m from Weng Guan Technology for the provision of underground utility solutions in Singapore. The contract will span a duration of 27 months, concluding in Jun 2027 (Q2FY28), with an option for a one-year extension.

 

Our Take. We view the contract positively, as it is expected to sustain UUE's earnings over the next two FY periods. Assuming a conservative GP margin of 30%, this could result in an annual GP of c.RM4.2m, representing 6.7% of our forecasted Group GP for the year. This latest win increases UUE’s unbilled order book to RM279.9m, equivalent to 2.2x FY24 revenue.

 

Outlook. The development marks UUE's first full-scale service offering in Singapore, including the supply of HDPE pipes which strengthens UUE’s foothold in Singapore, now accounting for c.11% of order book. Looking ahead, we expect sustained order replenishment on growing demand for HDD solutions, critical for modern grid connectivity. The Group currently holds a tender book exceeding RM200m, primarily for utility infrastructure projects in Malaysia and Singapore.

 

Earnings revision. No change to our earnings forecasts as the contract win is within our order book replenishment assumption of RM100m in FY25F.

 

Valuation & Recommendation. We maintain our BUY recommendation with an unchanged target price of RM1.10, pegged to a 20.0x PER on FY26F fully diluted EPS of 5.5 sen, and appraised with a three-star ESG rating. We believe the current share price weakness presents investors with an attractive buying opportunity as the Group trades at forward 10.3x FY26F P/E. We continue like UUE for its (i) specialisation in HDD solutions as its niche with high margins, (ii) strong proxies to benefit from TNB's grid upgrade plan, leveraging relationships with key main contractors, and (iii) expansion into subsea development, which is expected to drive margin expansion.

 

Risk. Heavy reliance on its top three customers. Risk of subcontractor non-performance. Inability to secure new contracts.

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