QES is expanding its Singapore operating footprint, with its 70%-owned subsidiary, QES (Singapore) Pte Ltd, acquiring two freehold B1 clean-industrial units at Space Nova for SGD5.5m (RM17.5m). The premises will support additional operating and demo-room capacity for its scientific instruments business.
We view the acquisition positively as a capacity-enabling investment, positioning QSG ahead of anticipated business and market expansion while alleviating existing space constraints. However, with vacant possession only expected by 30 June 2029, we see limited near-term earnings contribution.
QES has ample balance sheet headroom to fund the acquisition. FY26F cash and fixed deposits of RM142.5m versus borrowings of RM61.6m leave the Group in a net cash position, while our model continues to show net cash throughout the forecast period.
We maintain BUY and our RM0.75 TP, based on 20x P/E applied to FY27F EPS of 3.75 sen (previously 3.76 sen). FY26F/FY27F/FY28F core net profit estimates are trimmed marginally to RM26.7m/RM34.4m/RM43.4m, mainly reflecting higher finance costs from the acquisition.
The Acquisition. On 8 September 2026, QES (Singapore) Pte Ltd, a subsidiary held 70% by QES (Asia-Pacific) Sdn Bhd, entered into a Sale and Purchase Agreement with JVA Nir Pte Ltd (an unrelated third-party developer) to acquire two freehold Clean Industrial (B1) office units, Unit #05-04 (160 sqm) and Unit #05-05 (154 sqm), at Space Nova, 21 New Industrial Road, Singapore, for a total purchase price of SGD5.5m (approximately RM17.5m at SGD1:RM3.1971).
Funding & payment schedule. The consideration is funded 90% by new bank borrowings (~RM15.7m) and 10% by internally generated funds (RM1.8m). Payment follows a construction-milestone schedule typical of an off-plan purchase: 20% within 8 weeks of the Option (inclusive of the 5% booking deposit of RM0.9m already paid on 7 August 2026), a further 45% across seven construction-progress milestones (foundation through to car park/roads/drains completion), 25% on issuance of the Temporary Occupation Permit, and a final 10% on legal completion, due no later than 3 years after vacant possession.
Our View. We view the acquisition positively, supported by QSG's anticipated business growth in product and market expansion and the need to pre-empt bottlenecks from limited physical operating space, including demo-room capacity for customer visits. The units also offer long-term operating cash flow improvement from eliminating rental expense once QSG relocates into owned space, and in our view are strategically located with potential for value appreciation over time. That said, we flag this as a long-dated commitment, as the building is still under construction, with vacant possession only guaranteed by 30 June 2029 and legal completion by 30 June 2032.
Healthy balance sheet provides sufficient funding headroom. QES remains in a comfortable financial position despite the acquisition, with FY26F cash and fixed deposits of RM142.5m against total borrowings of RM61.6m, translating into net cash of c.RM80.9m. While the acquisition will be 90%-funded through bank borrowings, the staggered payment schedule limits the immediate funding requirement, with total borrowings projected to rise gradually to RM60.7m by FY29F. Importantly, our model still maintains a net cash position throughout the forecast period, with gearing peaking at only 0.24x in FY26F before declining thereafter. We therefore see ample balance sheet capacity to fund the acquisition while continuing to support QES’s ongoing expansion and working capital requirements.
Earnings Revision. FY26F/FY27F/FY28F core net profit forecasts are trimmed marginally to RM26.7m/RM34.4m/RM43.4m, from RM26.7m/RM34.5m/RM43.5m previously, mainly reflecting higher finance costs arising from the acquisition.
Valuation and Recommendation. We maintain our BUY call with an unchanged TP of RM 0.75 based on 20x P/E applied to a lower FY27F EPS of 3.75sen (previously 3.76sen), The revision of lower EPS mainly reflects the higher finance cost arising from the acquisition.
Risks. Semiconductor capex slowdown, fluctuation in forex, interest rate risk.
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