UUE has secured a SGD20.9m sub-subcontract (equivalent to c.RM67.3m) from Wee Guan Construction Pte Ltd for the installation of HDPE pipes using the HDD method in Singapore, with the contract period from 31 October 2025 to 31 December 2027. Following this award, UUE’s outstanding order book has increased to RM521.9m (3.1x FY25 revenue).
The contract marks UUE’s largest contract value secured in Singapore since its listing and is expected to sustain the Group’s earnings visibility through FY28.
Earnings forecasts for FY26F-FY28F have been revised up by 0.7%/1.7%/1.5%, reflecting the stronger order book replenishment and improved earnings visibility.
Upgrade to BUY with a higher TP of RM0.67 (from RM0.58), based on 19x FY27F EPS of 3.5sen and appraised with a three-star ESG rating.
Secures SGD20.9m Subcontract. UUE’s wholly owned subsidiary, Konnection Engineering Pte Ltd, has secured a SGD20.9m (equivalent to c.RM67.3m) sub-subcontract from Wee Guan Construction Pte Ltd, the subcontractor for the NDC409 Route A1 & A2 230kV cable project in Singapore. The scope involves the installation of high-density polyethylene (HDPE) pipes using the horizontal directional drilling (HDD) method, including the provision of materials, tools, labour, equipment, and other necessary accessories, with the contract period from 31 October 2025 to 31 December 2027. The project is commissioned by SP PowerAssets Limited, with LS Cable & System Singapore Branch as the main contractor.
Our Take. We view the contract award positively, as it marks UUE’s largest contract value secured in Singapore since its listing and is expected to sustain the Group’s earnings visibility through FY28. Assuming a conservative gross profit margin of 25%, the project is estimated to generate GP of RM16.8m over the 26-month contract period. This is expected to translate into c.RM1.7m in FY26F (3.0% of our pre-adjustment FY26F forecast), RM9.1m in FY27F (12.3% of our FY27F forecast), and RM6.0m in FY28F (7.0% of our FY28F forecast). Following this award, UUE’s outstanding order book has increased to RM521.9m, equivalent to 3.1x FY25 revenue.
Outlook. With this win, Singapore projects now account for 21.4% of UUE’s order book. HDD demand in Singapore remains robust, supported by recent wins such as the RM28.1m SP PowerAssets project and smaller HDD packages totalling RM111.5m, including the latest RM67.3m job. Execution has accelerated, with 10 HDD teams fully deployed since November and Lines 1 and 2 at the manufacturing facility running at c.70% utilisation, mainly for internal HDD works. We expect a meaningful earnings recovery from 4QFY26, underpinned by stronger execution and better cost absorption. The RM300m tender pipeline, with about 80% Singapore-based, and UUE’s solid track record position it well for further wins in Singapore’s HDD market.
Earnings revision. Following the new contract, UUE’s FY26F order-book replenishment has exceeded our earlier RM273.5m assumption. We raise it to RM347.7m, while lowering margins for Singapore due to the full HDD scope, compared to earlier material- and service-based jobs. Replenishment forecasts for FY27F and FY28F are revised to RM126.7m and RM293.8m (from RM243.2m and RM246.0m, respectively), reflecting temporary human capital constraints as resources are channelled to ongoing projects. Consequently, earnings are raised by 0.7%/1.7%/1.5% for FY27F/FY28F/FY29F, respectively.
Valuation & Recommendation. We raise our target P/E multiple from 17x to 19x to reflect the stronger demand for HDD solutions in Singapore and the improved growth outlook for UUE. New TP of RM0.67 (from RM0.58) is based on 19x FY27F EPS of 3.5sen and appraised with a three-star ESG rating. Upgrade UUE to BUY (from hold). 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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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.180625 | 4.213774 |
| EUR | 4.824538 | 4.829295 |
| CNY | 0.588551 | 0.589133 |
| HKD | 0.537960 | 0.541723 |
| SGD | 3.201822 | 3.227428 |