ISF has secured four sub-contracting works worth a total of RM22.5m for Cold Water and Sanitary Plumbing Services across several service apartments and one data centre.
Rising input costs for HDPE pipes and diesel is expected to result in modest margin compression for the Group’s operations moving forward.
Outlook remains positive, supported by the Group’s outstanding order book of RM148.1m, translating to a robust revenue coverage of 1.2x FY26F revenue.
In light of the increase in raw material costs, we have revised our CNP forecasts downward by -7.7%/-7.6% for FY26F/FY27F, respectively.
Maintain BUY recommendation with an increased TP of RM0.62 (from RM0.55), based on an unchanged 18.7x P/E applied to our rolled forward FY27F EPS of 3.3 sen, alongside a three-star ESG rating.
Secured Four Sub-Contracting Works. On 13 Apr 2026, ISF’s wholly-owned subsidiary, Yeo Plumber Sdn Bhd, has clinched four sub-contract works contracts from various parties, totalling RM22.5m. The sub-contract works consist of the supply, delivery, installation, testing, commissioning and maintenance of Cold Water and Sanitary Plumbing Services across several service apartments and one data centre. Work is scheduled to commence immediately with completion date ranging between Dec 2026 to Dec 2028.
Our View. We view these contract awards positively, as they demonstrate the Group’s ability to secure projects across multiple segments, thereby enhancing earnings visibility through FY28. Based on our assumptions of a 20% PBT margin for residential projects and 25% for data centre projects, we estimate these contracts to contribute RM1.9m, RM1.6m and RM1.1m in PBT for FY26, FY27 and FY28, respectively. Execution risk is expected to remain manageable, supported by the Group’s proven track record in delivering similar projects.
Outlook. Looking ahead, ISF’s earnings outlook remains resilient, supported by a healthy order book of RM148.1m, which translates into a robust revenue coverage of 1.2x FY26F revenue and provides strong earnings visibility. Based on an estimated burn rate of RM10.2m per month, we calculate that the Group has secured c.RM58.0m in new contract awards YTD. Backed by an assumed outstanding tender pipeline of c.RM350m, ISF remains on track to achieve our full-year new contract win target of RM150m. With a disciplined bidding strategy and a forecasted win rate of 30%, the Group is well-positioned to capitalise on sustained data centre investments in the Klang Valley and Johor, where projects typically offer shorter execution cycles and structurally higher margins, supporting earnings growth and margin sustainability over the medium term.
However, we remain mindful of macroeconomic headwinds, particularly rising input costs for high-density polyethylene (HDPE) pipes and diesel. Polyethylene, the key raw material for HDPE pipes, has increased by 29.3% year-to-date, while diesel prices in Malaysia have risen sharply by 128.6% since the onset of the recent Middle East conflict, based on pump price trends. Given that pipes and pipe fittings historically account for around 35% of the Group’s cost of materials and services, cost pressures are expected to weigh on project margins. Diesel, which is primarily used in machinery operations, further compounds this impact. We expect the combined increase in these key input costs to result in slight margin compression going forward. Notwithstanding these cost pressures, we believe the Group’s strong order book visibility, disciplined project selection and increasing exposure to higher-margin data centre projects should continue to underpin earnings resilience and support its overall growth trajectory over the medium term.
Earnings Revision. In light of the increase in raw material costs, we have revised our CNP forecasts downward by -7.7%/-7.6% for FY26F/FY27F, respectively.
Valuation & Recommendation. We maintain our BUY recommendation on ISF with an increased TP of RM0.62 (from RM0.55), based on unchanged 18.7x PE applied to rolled over FY27F EPS of 3.3 sen, along with a three-star ESG rating. We like ISF for its: (i) industry-leading margins, (ii) steady earnings growth trajectory and (iii) favourable exposure to high-growth data centre segment.
Risks. Rising material costs, labour shortages and slower-than-expected contract replenishment
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 3.961179 | 3.989062 |
| EUR | 4.642766 | 4.647694 |
| CNY | 0.581738 | 0.582351 |
| HKD | 0.505758 | 0.509339 |
| SGD | 3.104708 | 3.126789 |