UUE Holdings Bhd - Secures RM26.7m Subcontract for TNB Distribution Works
Thu, 30-Oct-2025 09:21 am
by Tan Sue Wen • Apex Research

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UUE (0310)

Target Price (RM)

0.67

Recommendation

Buy

  • UUE has secured a RM26.7m subcontract from Sutera Utama Sdn. Bhd. for the installation, testing, and commissioning of 11kV aluminium XLPE underground cables and accessories within TNB’s distribution network in the east coast region of Malaysia.

  • We view the contract award positively, as it is expected to sustain UUE’s earnings visibility through FY27.

  • As of FY26, UUE has secured total contracts valued at RM202.5m, bringing its outstanding order book to a record high of RM454.6m, underscoring the sustained demand for HDD solutions.

  • Maintain our BUY recommendation with a lower TP of RM0.67 (from RM1.06), after accounting for dilution from the bonus issue and warrant exercise, based on 17x FY27F EPS of 3.9sen and appraised with a three-star ESG rating.

 

Secures RM26.7m Subcontract. UUE’s wholly owned subsidiary, Kum Fatt Engineering Sdn Bhd has been awarded a RM26.7m subcontract from Sutera Utama Sdn Bhd for the installation, testing, and commissioning of 11kV aluminium XLPE underground cables and accessories within TNB’s distribution network in the east coast region of Malaysia. The contract has a duration of 730 days from the Notice to Start Work, with an option for a further 365-day extension subject to satisfactory performance.

 

Our Take. We view the contract award positively, as it is expected to sustain UUE’s earnings visibility through FY27. Assuming a 25% GP margin, the projects are estimated to generate GP of RM6.7m over the 730-day contract period. This is expected to translate into c.RM3.3m to be recognised in FY26 (5.5% of our FY26F forecast), and c.RM3.4m in FY27 (4.2% of our FY27F forecast). Should the extension be exercised, it would likely serve as an additional contract value for UUE. We see no material execution risks, supported by UUE’s established track record of timely delivery. Following these awards, UUE’s outstanding order book has risen to RM454.6m, equivalent to 2.7x FY25 revenue, reinforcing the Group’s earnings resilience and visibility.

 

Outlook.The recent contract awards in the East Coast Region further strengthen UUE’s strategic positioning, with the region now contributing c.35% of the Group’s order book, making it the third-largest contributor after the Southern Region. As of FY26, UUE has secured total contracts valued at RM202.5m, bringing its outstanding order book to a record high and underscoring the sustained demand for HDD solutions. Backed by a proven track record in executing complex HDD works, the Group is well-positioned to capture additional job flows from TNB as the utility accelerates efforts to advance the nation’s energy transition.

 

Earnings revision. No changes were made to our earnings forecasts, as the contract win falls within our order book replenishment assumption of RM273.5 m for FY26F. We have also incorporated the recent corporate exercises, namely the bonus issue and warrant exercise, which raised total proceeds of RM60.8m. Note that the warrants are still pending listing on Bursa Malaysia. Meanwhile, we have yet to factor in the potential solar investment to be funded from these proceeds, pending further clarity from the upcoming management briefing.

 

Valuation & Recommendation. We have raised our target P/E multiple from 15x to 17x to reflect the stronger demand for HDD solutions in national connectivity projects and the improved growth prospects for UUE following its recent contract wins. New TP of RM0.67 (from RM1.06) after accounting for dilution from the bonus issue and warrant exercise, is based on 17x FY27F EPS of 3.9 sen and appraised with a three-star ESG rating. Maintain BUY. 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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