Cheeding Holdings Berhad - In line growth as margins hold firm
Fri, 21-Aug-2026 06:58 am
by Research Team • Apex Research

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CHEEDING (0372)

Target Price (RM)

0.96

Recommendation

Buy

·   CHEEDING’s 1QFY27 core net profit came in at RM6.8m (-31.6% QoQ, -0.5% YoY), in line with our FY27F forecast at 17.8% and consensus FY27F forecast at 17.6%, supported by stronger margins and lower administrative expenses despite weaker contribution from overhead infrastructure EPCC projects.

·   We remain positive on CHEEDING's FY27 outlook, anchored by normalizing progress billings, strong grid and data centre tailwinds, and medium-term earnings diversification into underground utilities and substation works.

·   We maintain our earnings projections for FY27F–FY28F CNP at 38.4m and 44.3m respectively.

·   Maintain BUY with an unchanged TP of RM0.96, based on 20x FY27F EPS of 4.8 sen.

 

In line with expectations. After adjusting for unrealised forex gains (-RM0.1m) and a fair-value gain on insurance surrender value (-RM0.1m), CHEEDING’s 1QFY27 core net profit came in at RM6.8m (-31.6% QoQ, -0.5% YoY). The results were in line with our and consensus estimates at 17.8% and 17.6%, supported by sequentially stronger margins and lower administrative expenses despite weaker contribution from EPCC of overhead infrastructure for utilities projects.

 

QoQ. 1QFY27 core net profit declined 31.6% as revenue decreased 35.0% QoQ to RM18.8m, mainly due to lower revenue from underground infrastructure EPCC projects. Meanwhile, administrative expenses declined by 28.6% QoQ to RM2.4m. The effective tax rate rose to 25.0% from 22.6% in the preceding quarter. Nonetheless, core net profit margin expanded to 36.4%, representing a 1.8 percentage-point improvement QoQ.

 

YoY. 1QFY27 core net profit was largely flat (-0.5% YoY) despite a 20.7% increase in revenue to RM18.8m, as core net profit margin narrowed to 36.4% from 44.1% in 1QFY26 on a less favourable project mix.

 

Declares Dividend. CHEEDING declared a 0.30sen interim dividend with an ex-dividend date of 8th September 2026.

 

Outlook. We remain positive on CHEEDING’s FY27 prospects, with overhead infrastructure EPCC works contributing c.98% of 1QFY27 revenue, we expect progress billings to normalise in the coming quarters as ongoing packages advance, while orderbook replenishment remains the key near-term catalyst. Sector demand remains underpinned by ongoing grid modernisation and expansion, data centre developments, industrial growth and the Government’s energy transition initiatives, which are expected to sustain demand for utilities engineering services. Over the medium term, management’s push into underground utilities and substation engineering services, together with the establishment of an in-house Design Department, should broaden its earnings base beyond overhead infrastructure works. Coupled with its stronger balance sheet post-listing, we believe CHEEDING is better positioned to compete for larger-scale utilities infrastructure projects moving forward.

 

Earnings revision. No changes to our earnings forecasts at this juncture.

 

Valuation & Recommendation. We maintain our BUY call and our unchanged TP of RM0.96. Our valuation remains pegged on a 20x FY27F EPS of 4.8 sen. As we remain constructive on CHEEDING’s outlook, given its: (i) established track record in utilities infrastructure EPCC works, (ii) expansion into higher-value underground utilities and substation engineering services, (iii) stronger execution and tendering capabilities post-listing, and (iv) direct exposure to Malaysia’s ongoing grid modernisation and rising power infrastructure requirements.

 

Risks. Customer concentration risk, material cost fluctuations, and tender pricing risk.

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