HEB delivered record-high revenue of RM201.2m and core net profit of RM24.7m in FY24, marking YoY growth of 7.4% and 22.0%, respectively. This was driven by contributions from various high-impact infrastructure projects in Malaysia and abroad.
The Group’s current order book stands at RM2.1bn, equivalent to 10.3x FY24 revenue, providing strong medium- to long-term earnings visibility. This replenishment was driven by several domestic and overseas wins across multiple industries, reflecting the Group’s leading technical expertise.
We project a three-year CNP CAGR of 45.3% to RM52.2m in FY26F, supported by (i) strong order book replenishment of RM200m in FY25F and RM250m in FY26F-FY27F; (ii) Baghdad Metro project moving onto the second phase and providing improved cash flow visibility; and (iii) expected finalisation of the tendering process for the MRT3 project.
We initiate coverage on HEB with a BUY recommendation and a TP of RM0.75, based on 7.2x P/E multiple applied to FY26F EPS of 10.3sen, and a three-star ESG rating.
Key Investment Highlights
Improving Prospects from Baghdad Metro Project. HEB’s largest-ever overseas contract, the Baghdad Metro, is now moving into more active execution stages, translating into steadily increasing revenue recognition. The project not only delivers substantial billings but also cements HEB’s credentials in mega-scale urban rail systems. As engineering progress advances in FY25, the share of revenue from this contract is expected to climb further, improving the Group’s operating cashflows in the process. In a recent meeting with management, it was noted that initial budding issues have been effectively resolved. The Group has since received the completion certificate for the first 10% milestone payment and expects a smoother process in the future.
Strong Order Book Replenishment and Execution Track Record. The Group closed FY24 with a record RM2.1bn order book, providing revenue visibility for the next eight years. This replenishment was driven by domestic wins such as the Westport 2 expansion, numerous water-related infrastructure and various data centre projects, alongside international contracts like the Baghdad Metro and Phnom Penh-Bavet Highway. As of the 1QFY25, the Group is actively pursuing RM475m worth of tenders across Malaysia, Southeast Asia and the Middle East. The recently announced 13th Malaysia Plan allocates substantial funding to infrastructure connectivity, flood mitigation and green energy developments – sectors where HEB already holds strong technical capabilities.
Accelerated Contribution from MRT3. TheMRT3 Circle Line, covering approximately 52km and featuring 32 stations, has been officially approved the by Malaysian Transport Ministry last month. As the land acquisition process is expected to be completed alongside the re-tendering procedures by end-2026, we anticipate full construction to commence in 2027. With the tender process finalised and the MRT3 project moving into execution, HEB is set to benefit from a meaningful upside in project-related revenue beginning in FY26 by leveraging its earlier engagement in the design phase.
Valuation & Recommendation. We initiate coverage on HEB with a BUY recommendation and a target price of RM0.75, based on 7.2x P/E multiple applied to FY26F EPS of 10.3sen and supported by a three-star ESG rating. While the Group is currently trading near 2 standard deviations below its 5-year average, we believe a rerating to -1.75SD is prudent as a result of its asset light business model and better profit margin relative to its peers. However, we believe further clarity on its Baghdad project moving forward will warrant further rerating potential.
Risks. Delays in project execution & delivery, foreign project exposure leading to potential geopolitical risk and lower-than-expected order book replenishment.
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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.
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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 |