Cheeding Holdings Berhad - Electrifying Growth: Malaysia’s Transmission Champion
Mon, 06-Oct-2025 07:12 am
by Tan Sue Wen, Ong Tze Hern • Apex Research

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CHEEDING (0372)

Target Price (RM)

0.73

Recommendation

Buy

Overhead Transmission Specialist. CHEEDING is a proven transmission builder, deriving c.69% of FY25 revenue from EPCC of overhead lines. As a main contractor to TNB, it has successfully delivered more than 20 national transmission projects across Peninsular Malaysia. Licensed up to 500kV, the highest voltage class in Malaysia and held by only a select group of contractors, CHEEDING enjoys a strong competitive moat and superior margin profile, particularly in overhead projects where tower optimisation provides scope for material cost savings. With demand underpinned by both Malaysia’s RP4 grid expansion and the long-term ASEAN Power Grid (US$100bn investment, 17,550MW of cross-border capacity by 2040), transmission will remain CHEEDING’s anchor earnings driver, with segmental CAGR of 10.1% forecast over FY25-FY28F.

 

Orderbook Expansion via IPO Funds. Growth has recently been constrained by working capital requirements and performance bonds, which typically lock up 10-15% of contract value (performance bond + retention). Post-IPO, CHEEDING will raise RM51.5m, of which RM24.6m (47.8%) is allocated to working capital and RM16.2m (31.4%) to performance bonds. At a 5% bond requirement, this provides bidding headroom of RM324m, equivalent to 1.6x its current RM202.7m orderbook. According to management, the IPO will enable CHEEDING to expand its total orderbook capacity to ~RM700-800m, materially increasing its scale and allowing participation in larger packages, especially HV underground and substation projects. Supported by a tender book of c.RM350m and a guided win rate of 20-25%, the enlarged balance sheet removes liquidity bottlenecks and underpins sustained multi-year growth.

 

Underground Utilities Expansion. CHEEDING is scaling its underground utilities business, centred on open-cut trenching for 132-275kV cables. Near-term CAPEX (RM3.2m, 6.2% of IPO proceeds) will fund new machinery, a dedicated Design Department, and the build-up of in-house jointing expertise starting at 132kV. This segment is structurally supported by Malaysia’s data centre boom, as hyperscalers require redundant HV feeders to ensure uninterrupted supply in hubs such as Cyberjaya and Sedenak. Underground cabling is mission-critical where overhead lines are not feasible, making it a key enabler of DC connectivity. We project underground EPCC to deliver a 34.6% CAGR over FY25-FY28F, emerging as CHEEDING’s second growth pillar.

 

Rising Demand for Substation Infrastructure. CHEEDING is also positioning for larger roles in substations, where RP4’s doubled average annual capex allocation (RM14.3bn) and a pipeline of c.150 DC projects and new industrial parks are driving demand for new 132-275kV capacity. While current involvement is focused on modification and retrofit works, the Group is building in-house design capabilities and exploring partnerships with established EPCC players to qualify for full-scope substation tenders. With packages ranging from RM50-300m, successful entry would transform substations into CHEEDING’s third earnings pillar, allowing the Group to evolve into a one-stop provider across transmission, underground, and substation solutions.

 

Margin Resilience. CHEEDING has consistently achieved core net margins above 20%, supported by (i) its favourable project mix, where overhead transmission projects are the Group’s largest revenue contributor, offering greater scope for cost optimisation, (ii) asset-light approach, where capital-intensive scopes such as HDD, 132kV/275kV jointing, SCADA, and secondary systems are subcontracted to certified vendors, enabling CHEEDING to avoid heavy depreciation and idle cost burdens. While margins are expected to normalise as underground utilities scale, we still forecast 20-23% core net margins over FY25-FY28F, reflecting a more diversified but robust earnings base.

 

Attractive Valuation. At the IPO price of RM0.36, CHEEDING is valued at a trailing P/E multiple of 10.9x based on FY25 EPS of 3.30 sen. This appears undemanding relative to Malaysian small- and mid-cap engineering and infrastructure peers, which typically trade at 12x-20x forward P/E. Given its strong core net margin profile (>20%), net cash position, a long-standing relationship with TNB, and direct exposure to Malaysia’s RM14.3bn average annual grid capex under RP4, we believe the IPO valuation offers a compelling entry point into a high-barrier, high-visibility segment of the utility infrastructure market.

Initiation Coverage. We initiate coverage on CHEEDING Holdings Berhad (CHEEDING) with a BUY call and a target price of RM0.73, derived from 17.0x P/E applied to FY27F EPS of 4.3 sen. Our assigned multiple represents a c.15% premium to the underground utilities peer average forward P/E of 14.7x, which we believe is justified by CHEEDING’s: (i) rare licensing strength in 500kV transmission, the highest voltage class and a prerequisite for future backbone upgrades and ASEAN Power Grid corridors, (ii) integrated coverage across the electricity value chain, including overhead transmission, underground utilities, and substations, positioning CHEEDING as a one-stop EPCC provider, (iii) proven track record of delivering more than 20 national infrastructure projects across Peninsular Malaysia, and (iv) strong core net margins (>20%) well above sector averages, supported by its focus in high-margin overhead transmission projects and an asset-light model that reduces capital intensity.

These attributes position CHEEDING as a direct proxy to Malaysia’s electrification and energy transition agenda, supported by RP4’s RM14.3bn average annual grid capex and the accelerating demand for transmission and substation infrastructure from the country’s fast-growing data centre industry.

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