UUE Holdings Bhd - Awarded RM92.4m Subcontracts for TNB-linked Project
Wed, 11-Jun-2025 07:33 am
by Tan Sue Wen • Apex Research

Counter

UUE (0310)

Target Price (RM)

1.09

Recommendation

Buy

Secures RM92.4m Subcontracts. UUE's wholly-owned subsidiary, Kum Fatt Engineering Sdn Bhd has been awarded subcontracts collectively valued at RM92.4m from Komasi Engineering Sdn Bhd. This award encompasses one renewal contract and three new contracts. The scope of these subcontracts involves delivering underground utility solutions in Malaysia’s east coast and southern regions, specifically for the installation, testing, and commissioning of 11kV and 33kV Aluminium XLPE underground cables and accessories within TNB's distribution network division. The renewal contract has an estimated value of RM13.0m with a one-year duration. Meanwhile, the new contracts, totalling RM79.4m, have a 730-day contract period from the “Notice to Start Work” issued by Komasi, with an option for a 365-day extension.

 

Our Take. We view these contract awards positively, as they are expected to sustain UUE's earnings over the next three financial years. Based on a conservative GP margin of 25%, the one-year renewal contract is estimated to contribute an annual GP of c.RM3.3m. Concurrently, the new two-year contracts are expected to yield an annual GP of c.RM9.9m, collectively accounting for 20.7% of our forecasted GP for FY26F. The latest win increases UUE's unbilled order book to RM332.6m, equivalent to 2x FY25 revenue. We anticipate the new contracts will be completed within their stipulated timeframes, given UUE’s robust track record of execution.

 

Outlook. The recent contract awards are significant, marking UUE's fifth from TNB-linked projects this year and representing the highest aggregate value achieved by the company to date. We anticipate continued job momentum in the near term, supported by strong demand for HDD solutions as TNB intensifies its efforts to drive the nation's energy transition. During TNB’s latest analyst briefing, management highlighted the signing of five Electricity Supply Agreements (ESAs) for DC projects, totalling 666MW of maximum capacity in 1QFY25 alone. They anticipate an additional 10 ESAs for DC projects (each averaging 150MW-200MW capacity) will be signed by year-end. Given UUE's proven track record, the company is well-positioned to capitalise on this sustained demand from TNB, ensuring its robust growth prospects remain intact.

 

Earnings revision. Given that the FY26F YTD order book replenishment of RM184.6m has exceeded our FY26F forecast of RM136m, we have raised our order book replenishment assumption for FY26F to FY28F to a range of RM200m-RM230m (previously RM140m-RM180m). Consequently, we have raised our earnings forecasts by 23%/38%/29% for FY26F/FY27F/FY28F respectively.

 

Valuation & Recommendation. We maintain our BUY recommendation with a higher target price of RM1.09 (from RM0.83), based on 15x FY27F EPS of 7.3 sen and appraised with a three-star ESG rating. We continue to favour UUE for its (i) specialisation in HDD solutions, a high-margin niche, (ii) strong positioning as a key beneficiary of TNB’s grid upgrade plans, supported by its established relationship with major customers, and (iii) strategic expansion into subsea development, which is anticipated to drive future margin expansion.

 

Risks. Heavy reliance on its top three customers. Cost overruns. Inability to secure new contracts.

Read more details in:

Disclaimer

The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.

Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.210973 4.249411
EUR 4.954495 4.965490
CNY 0.589445 0.590817
HKD 0.536642 0.541158
SGD 3.306006 3.333319