Earnings are expected to improve in the coming quarters, supported by the resumption of projects in Singapore and continued progress of Malaysian HDD projects along the S-curve.
Order book stood at an all-time high of RM421.7m, representing 2.5x FY25 revenue. Prospects in Singapore have strengthened following the upgrade of UUE’s construction licence from BCA Grade L4 to L5 under category CR07, allowing the Group to tender for larger-scale contracts. The tender book currently amounts to RM 160m, with the majority from Malaysia.
Gearing ratio rose to 0.41x (from 0.34x), mainly due to funding for the second HDPE manufacturing facility. The new plant will house six to nine additional HDPE extrusion lines, potentially expanding capacity by two to three times. Completion is targeted by June 2026, with earnings contribution expected to begin from FY27F onward.
We maintain our earnings forecasts at this stage, as current developments remain in line with expectations.
Maintain our BUY recommendation with an unchanged TP of RM1.06, based on 15x FY27F EPS of 7.3 sen and appraised with a three-star ESG rating.
Following our recent engagement with UUE, we came away reassured of the company’s outlook. Key takeaways are as follows:
Soft Start in 1QFY26. UUE recorded a core net profit of RM1.9m in 1QFY26, representing a YoY decline of 67.9%. The underperformance was primarily driven by many projects in Malaysia either nearing completion or still in the early stages of the S-curve phase, where revenue recognition tends to be lower. Additionally, project execution in Singapore faced delay due to permit processing issues, further impacting performance. Moving forward, management expects earnings to improve in the coming quarters. The company plans to scale up its HDD team in Singapore from two to ten units by 2HFY26, which could generate monthly revenue of SGD1.0-1.5m. Coupled with the continued progress of Malaysian HDD projects along the S-curve, these developments are expected to further support the recovery in overall performance.
HDPE Capacity Expansion. During the quarter, the Group’s gearing ratio increased to 0.41x (from 0.34x in 4QFY25), primarily driven by funding requirements for the second manufacturing facility under its subsidiary, Premier Plastic Industry (PPI). Construction of the new plant is currently under way, with completion targeted by June 2026. The facility is expected to house six to nine additional HDPE extrusion lines, representing a potential 2-3x increase over the existing capacity of 1,400kg/hr. Focus will be on corrugated products, which consume less resin and are seeing growing demand from developers. We view this expansion as a strategic move to scale operations and diversify the Group’s product offering, with meaningful earnings contribution anticipated from FY2027F, upon the successful commissioning of the plant.
Order Book at All-Time High. As of 31 May 2025, UUE’s orderbook stood at RM421.7m (93% from electricity supply, remainder from Telco), representing 2.5x FY25 revenue. The Group’s current tenderbook is about RM160m, with 84% of the opportunities located in Malaysia and the remaining 16% in Singapore. UUE’s prospects in Singapore have strengthened following the upgrade of its construction licence from BCA Grade L4 to L5 under category CR07, allowing the Group to tender for larger-scale projects. Supported by ongoing public infrastructure spending, this higher licence tier is expected to open up additional contract opportunities and broaden UUE’s regional revenue base.
Progress in Subsea Segment. UUE has signed a memorandum of understanding with ASEAN Cableship, a leading Asia-Pacific provider of submarine cable installation, repair, and maintenance services covering Singapore, Malaysia, Thailand, the Philippines, Indonesia, and Brunei. The collaboration allows UUE to tap ASEAN Cableship’s extensive network and technical expertise for new subsea-infrastructure projects. To accelerate its entry into the segment, UUE has invested RM7m of IPO proceeds in a Maxi HDD rig, in line with the expansion plan outlined in its IPO prospectus. Although still at an early stage, the venture diversifies UUE’s business portfolio and is well-aligned with its long-term growth objectives.
Expansion into Solar Energy. In June, UUE strategically ventured into the solar energy sector via Enerxite, a 60% joint venture with Daryl Lai, who brings extensive experience in the field. As of 30 June, Enerxite has secured an order book of RM1.9m, which is expected to contribute c.RM0.8m-1m to the Group’s PBT, demonstrating early market traction. Enerxite plans to pursue larger scale utility solar and battery energy storage system contracts, which offer significantly higher contract values. While near-term earnings contribution is expected to remain modest given its current focus on rooftop solar, where project values are relatively small compared with the Group’s core business, we believe this measured approach provides a solid platform for long-term growth, supported by the earnings potential of future large-scale contract wins.
Earnings revision. We maintain our earnings forecasts unchanged, as current developments are in line with expectations.
Valuation & Recommendation. We maintain our BUY recommendation with an unchanged target price of RM1.06, based on 15x FY27F EPS of 7.1 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. Risk of subcontractor non-performance. Inability to secure new contracts.
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Currency | Buy Rates (RM) | Sell Rates (RM) |
---|---|---|
USD | 4.212042 | 4.248408 |
EUR | 4.921000 | 4.929487 |
CNY | 0.591903 | 0.592919 |
HKD | 0.540309 | 0.544492 |
SGD | 3.268153 | 3.293573 |