Pekat Group Berhad - RM31.3m TNB Contract
Tue, 05-Aug-2025 07:34 am
by Tan Sue Wen, Ong Tze Hern • Apex Research

Counter

PEKAT (0233)

Target Price (RM)

1.870

Recommendation

Buy

  • PEKAT’s 60%-owned EPE Switchgear has secured a RM31.3m LOA from TNB for the maintenance, servicing, and repair of AIS and GIS. The contract will commence on 1 August 2025 and will be effective for two years, with an option to extend for an additional year.

  • Assuming the full contract sum is utilised over the two-year period and the contract achieves a 25% GP margin, PEKAT is projected to generate c.RM7.8m in GP across two years (4.1% of our FY25F forecast).

  • This marks EPE’s third TNB contract win this year, bringing the total secured value to RM263.8m. Order book replenishment for switchgear are expected to remain robust, driven by rising demand for grid upgrades as TNB accelerates its electrification agenda.

  • No changes to our earnings forecasts, as this job win is within our order book replenishment assumption.

  • Reiterate a BUY rating with an unchanged target price of RM1.87, based on a sum-of-parts (SOP) valuation and assigned a three-star ESG rating.

 

RM31.3m TNB Contract. PEKAT, through its 60%-owned subsidiary, EPE Switchgear, has secured a LOA valued at RM31.3m from TNB. The contract covers the maintenance, servicing, and repair of Air Insulated Switchgear (AIS) and Gas Insulated Switchgear (GIS), along with the supply and installation of spare parts for TNB’s distribution network. The contract is set to commence on 1 Aug 2025 and will remain effective for a period of two years, with an option to extend for an additional year.

 

Our Take. This is a positive development for PEKAT, as it supports the Group’s earnings growth through FY27F. Assuming the full contract sum is utilised over the two-year period and the contract achieves a 25% GP margin, PEKAT is projected to generate c.RM7.8m in GP across two years (4.1% of our FY25F forecast). Following recent contract wins, PEKAT’s unbilled orderbook is estimated at ~RM757.5m, equivalent to 2.6x FY24 revenue, ensuring earnings visibility for the next three years.

 

Outlook. This marks EPE’s third TNB contract win this year, bringing the total secured value to RM263.8m, which reflects the sustained demand for switchgear solutions. As Malaysia advances its electrification agenda to modernise the national grid to smart grid standards, meet rising electricity demand, and facilitate renewable energy integration, we expect order replenishment for switchgear to remain robust over the short to medium term. With a longstanding relationship with TNB spanning five decades, EPE is strategically positioned to secure additional opportunities and drive PEKAT’s medium-term growth.

 

Earnings revision. No changes to our earnings forecasts, as this job win is within our order book replenishment assumptions.

 

Valuation & Recommendation. Reiterate our BUY recommendation with a TP of RM1.87, based on a SOP valuation and a three-star ESG rating. Our TP has yet to reflect the recently proposed private placement, as issue price and completion details are still pending. We remain positive of PEKAT for its synergistic business modelstrong margins in the EPE division, and a sustainable order book. Additionally, PEKAT’s strong historical financial results qualify the Group for a transfer to the Main Board of Bursa Malaysia.

 

Risks. Heavy reliance on government initiatives. Inability to secure new contracts. Spike in raw material costs such as copper and steel.

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