UUE Holdings Bhd - Awarded RM83.4m Subcontracts for TNB-linked Project
Mon, 16-Jun-2025 07:57 am
by Tan Sue Wen • Apex Research

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UUE (0310)

Target Price (RM)

1.09

Recommendation

Buy

Secures RM83.4m Subcontracts. UUE’s wholly-owned subsidiary, Kum Fatt Engineering Sdn. Bhd., has been awarded three subcontracts with a total value of RM83.4m from Sutera Utama Sdn. Bhd. The scope of these subcontracts involves delivering underground utility solutions, including the installation, testing, and commissioning of 11kV and 33kV aluminium XLPE underground cables and accessories within TNB’s distribution network in the Northern and Southern Regions of Peninsular Malaysia. The contracts have a two-year period from the Notice to Start Work, with an option for a one-year extension.


Our Take. We view these contract awards positively, as they are expected to sustain UUE’s earnings over the next two financial years. Based on a conservative GP margin of 25%, they are projected to generate an annual GP of c.RM10.4m, representing 15.2% of our forecast for FY26F. We anticipate no execution challenges, as the projects are expected to be completed within their stipulated timeframes, given UUE’s proven track record of successful execution and timely delivery. These awards bumped UUE’s outstanding order book to RM416m, representing 2.4x of FY25 revenue.


Outlook. The recent contract awards in the Northern Region further solidify UUE’s strategic position, with the region now accounting for c.12.5% of the order book, making it the third-largest contributor after the Southern Region and East Region. YTD, UUE has secured seven new contracts, four contract renewals, and one work extension from projects with TNB, bringing outstanding order book to a record high of RM416m, underscoring the strong and sustained demand for HDD solutions. Backed by its proven track record in executing HDD solutions, the Group is well-positioned to secure additional job flow from TNB as it intensifies efforts to drive the nation’s energy transition.


Earnings revision. No change to our earnings forecasts as the contract win is within our order book replenishment assumption of RM273.5m for FY26F.


Valuation & Recommendation. We maintain our BUY recommendation with an unchanged target of RM1.09, 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.

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