ISF Group Berhad - ISF Bags Another Data Centre Job
Fri, 12-Jun-2026 07:50 am
by Research Team • Apex Research

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ISF (0390)

Target Price (RM)

0.62

Recommendation

Buy

ISF has secured a sub-contracting work worth RM14.5m for Internal Sewerage Package for a data centre.

Assuming an estimated 25% PBT margin, the contract is expected to contribute c.RM3.6min PBT, representing 9.8% of our FY26 PBT forecast.

The Group's outstanding order book of RM153.5 million continues to underpin a positive outlook, providing solid revenue visibility equivalent to a book-to-bill ratio of 1.3x FY26 revenue.

Maintain BUY recommendation with an unchanged TP of RM0.62, based on an unchanged18.7x P/E applied to FY27F EPS of 3.3 sen, alongside a three-star ESG rating.

 

Secured a Sub-Contracting Work. On 10 June 2026, ISF’s wholly-owned subsidiary, Yeo Plumber Sdn Bhd, was awarded a sub-contracting work contract by an established Malaysian-based construction company, amounting to RM14.5m. The sub-contract work consists of internal sewerage works, including testing and commissioning, for a data centre. Work is set to commence immediately with a completion date scheduled for 26 March 2027.

Our View. We view this contract award positively, as they demonstrate the Group’s ability to secure projects across multiple segments, thereby enhancing earnings visibility through FY29. Assuming an estimated 25% PBT margin, the project is expected to contribute RM3.6m in PBT over its duration, representing 9.8% of our FY26 PBT forecast. Given the Group's established track record in executing comparable projects, execution risk should remain well-contained, while its growing scale and accumulated project experience in data centres may further strengthen delivery capabilities.

Outlook. ISF's earnings outlook continues to look resilient, anchored by a healthy RM153.5 million order book that provides a book-to-bill ratio of 1.3x FY26 revenue and underpins solid earnings visibility. Assuming a monthly burn rate of RM10.2 million, we estimate the Group has secured approximately RM72.5 million in new contract awards YTD. With an estimated tender pipeline of around RM428.2 million still outstanding, ISF remains on track to meet our full-year target of RM150 million in new contract wins. 

Water and sewerage infrastructure plays several critical roles in data centre operations, which is why specialist piping subcontractors like ISF are increasingly in demand for these projects. Cooling, one of a data centre's largest operational loads, increasingly relies on liquid cooling systems, which require extensive piping installed by plumbing contractors, along with sewerage systems to manage resulting wastewater. In 2023, data centers directly consumed about 17 billion gallons of water for cooling in, with hyperscale facilities using up to 5 million gallons daily, a figure that could double or quadruple by 2028 amid AI-driven expansion (Lawrence Berkeley).

Earnings Revision. No changes to our earnings forecast.

Valuation & Recommendation. We maintain our BUY recommendation on ISF with an unchanged TP of RM0.62, based on unchanged 18.7x PE applied to 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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