ISF Group Berhad - The Complete Water Solutions Provider
Tue, 13-Jan-2026 09:38 am
by Tan Wai Wern • Apex Research

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ISF (0390)

Target Price (RM)

0.550

Recommendation

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  • ISF Group is an integrated solutions provider specializing in the supply and installation of both internal and external water piping infrastructure.

  • We project a net profit CAGR of 55.0% between FY24 to FY27F, underpinned by our assumption of annual orderbook replenishment of RM150m in FY26F and FY27F, with 60% derived from higher-margin segments such as data centres and industrial properties.

  • Growth will be supported by the expanding data centre segment, which accounts for 13.9% of the current orderbook and 47.5% of FPE 2025 revenue, underscoring its increasing contribution to the Group’s earnings profile.

  • We recommend subscribe to ISF Group Berhad’s IPO with a target price of RM0.55 (65.5% upside from IPO price) based on P/E multiple of 18.7x pegged to FY26F core EPS of 2.9 sen.

 

Key Investment Highlights

Margin Resilience. ISF Group has delivered strong margin resilience, with gross profit margins expanding from 27.3% in FYE 2022 to 44.0% in FPE 2025, driven by a strategic shift towards higher-margin projects and supported by operational efficiencies. While lump sum contracts allow the Group to benefit from lower raw material prices, newly awarded contracts are expected to reflect prevailing HDPE costs and deliver more normalised margins. Overall gross profit margins are nonetheless expected to remain above 40%.

 

Structural Upside from Data Centre Construction Cycle. ISF Group is well-positioned to benefit from Malaysia’s accelerating data centre construction cycle, where its strong execution track record enhances its contract win potential. Data centre projects offer structurally superior economics, with historically higher margins due to greater technical intensity and stricter standards.

 

Strong Orderbook and Tender Pipeline. The group’s outstanding unbilled order book stood at RM120.7m, representing a book-to-bill ratio of 1.2x FY25F revenue, provides strong revenue visibility and earnings pipeline. Beyond existing orderbook, a RM460m tender pipeline which largely skewed towards data centre and industrial projects, is expected to lift its margin profile and boost order book replenishment.

 

Valuation & Recommendation. We recommend Subscribe on ISF Group Berhad’s IPO, with a target price of RM0.55, representing a potential upside of 65.5% from the IPO price. It is based on a target P/E multiple of 18.7x applied to FY26F core earnings per share of 2.9 sen representing a c.30% premium to the broader Malaysian construction sector’s average P/E of 14.5x.

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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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