• HEB’s 1HFY26 core net profit of RM10.7m (-10.0% YoY) accounted for 52% of our FY26F forecast and 46% of consensus estimates, which is line with our expectation.
• Outlook remains positive, supported by the Group’s outstanding orderbook of c.RM2.28bn, translating to a robust revenue coverage of 10.3x FY25 revenue.
• Consequently, we raise our FY26F/FY27F core net profit forecasts by +20.0%/+10.2%, to RM24.6m/RM30.2m respectively, while introducing FY28F core net profit of RM44.5m.
• We upgrade recommendation from HOLD to BUY on HEB with an increased TP of RM0.70 (from RM0.47), based on a revised SOP valuation, supported by a three-star ESG rating.
Results within expectations. HEB reported a 2QFY26 core net profit of RM6.9m (+84.8% QoQ, +5.4% YoY) after adjusting for reversal of impairment of financial instrument (RM0.10m). This brought 1HFY26 core net profit to RM10.7m (-10.0% YoY), accounting for 52% of our FY26F forecast and 46% of consensus estimates, broadly in line with both our and consensus full-year forecasts, underpinned by resilient earnings contribution from ongoing projects.
QoQ. Revenue rose 19.4% QoQ to RM54.9m as Engineering Design revenue jumped 36.6% QoQ to RM16.0m and Project Management rose 15.4% QoQ to RM24.6m, aided by the Davao Public Transport Modernization consulting contract and KTP Data Centre project management fees. Core net profit surged 84.8% QoQ to RM6.9m, while PBT jumped 68.7% QoQ to RM9.4m, reflecting positive operating leverage on the revenue recovery.
YoY. Revenue fell 4.8% YoY to RM54.9m, dragged by the absence of Middle East revenue (-100% YoY, no Baghdad Metro contribution) and lower India billings (-72.6% YoY) as the Tuna Tekra project design phase progressed past its peak. This was partly offset by new Philippines revenue (>100% YoY) from the Davao PTMP contract and the first Bangladesh billings. Despite the softer top line, core net profit still rose 5.4% YoY on a leaner cost base, with admin expenses fell 8.7% YoY and other operating expenses fell 24.4% YoY.
YTD. 1H26 revenue fell 7.6% YoY to RM100.9m, but PBT rose a strong 26.6% YoY to RM14.9m and net profit rose 28.9% YoY to RM10.3m, aided by a 4.2% YoY improvement in gross profit despite lower revenue, implying a richer project mix and better cost discipline, and a 30.5% YoY reduction in other operating expenses.
Outlook. We remain constructively positive on the 2HFY26 outlook with The Group's order book stood at RM2.15bn as at 30 June 2026, with Project Management contributing about 80%, lifted further to RM2.28bn following the RM34.0m NPWSS design consultancy win in July 2026, alongside a tender book of RM500m, together underpinning solid medium-term earnings visibility. HEB remains well positioned to benefit from Malaysia's accelerating infrastructure cycle, with Budget 2026's RM81bn development allocation, complemented by about RM30bn from GLICs, RM10bn in public-private partnerships, and RM10.8bn from government-linked companies, for a total of about RM131.3bn, supporting continued rollout across transportation, water, rail, and renewable energy.
The Group is also diversifying into higher-value and recurring income streams. Its digital and AI arm secured an MPOB grant for AI-powered drone solutions and has digitised over 1,500 telecom towers under an ongoing Digital Twin engagement, with 1,000 more scheduled in 2026, while international expansion continues via the roughly RM19.2m Davao Public Transport Modernisation contract in the Philippines. On the recurring-income front, HEB's 95.0MW Hilir Perak solar plant reached financial close in April 2026, and its 29.99MW Kuala Muda solar project is under construction. Together these are expected to strengthen the Group's long-term earnings base as it broadens beyond traditional engineering consultancy.
Earnings Revision. We take this opportunity to revise our core net profit forecasts upward, premised on the Group's sizeable outstanding order book of approximately RM2.28bn and a healthy tender book of approximately RM500m, both of which underpin stronger medium-term earnings visibility. Consequently, we raise our FY26F/FY27F core net profit forecasts by +20.0%/+10.2% to RM24.6m/RM30.2m respectively. We also introduce FY28F core net profit of RM44.5m, premised on the anticipated ramp-up in project management and engineering design billings from the Group's transportation, water infrastructure, and renewable energy pipeline, which extends the Group's earnings visibility into FY28.
Valuation and Recommendation. We upgrade recommendation from HOLD to BUY on HEB with an increased TP of RM0.70 (from RM0.47), based on a revised SOP valuation, supported by a three-star ESG rating.
Risk. Delays in project execution & delivery, foreign project exposure leading to geopolitical risks and lower-than-expected order book replenishment.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.065852 | 4.097386 |
| EUR | 4.589381 | 4.597416 |
| CNY | 0.610175 | 0.610647 |
| HKD | 0.518032 | 0.522054 |
| SGD | 3.177971 | 3.202709 |