· Greater confidence in earnings delivery as CBHB scales up execution of its RM890m outstanding order book, supported by continued data centre-related project wins.
· Raise FY26F-FY28F core net profit by 24-25%, mainly reflecting stronger operating leverage as administrative expenses remained at 4.3% of revenue in 1HFY26 versus 8.2% in FY25.
· Maintain revenue, gross margin and order book replenishment assumptions, with the RM1.0bn FY26 tender book supporting our RM600m new-order replenishment assumption.
· Maintain BUY with TP raised to RM1.31 from RM1.05, based on an unchanged 23.1x FY28F P/E; the TP upgrade is entirely earnings-driven.
Stronger Earnings Visibility. CBHB's share price has surpassed our previous TP of RM1.05, prompting us to revisit our earnings assumptions. We now have greater confidence in the company's ability to execute its enlarged order book, underpinned by sustained data centre-related project wins and its established track record in HV substation works.
Our View. We are increasingly confident in CBHB's earnings delivery as the company scales up its data centre-related project execution. Its outstanding order book of c.RM890m, equivalent to 4.1x FY25 revenue, provides strong medium-term revenue visibility, while its established track record in HV substation works supports our confidence in execution. Recent project wins further reinforce the sustainability of its data centre pipeline.
Importantly, the sharp increase in revenue has yet to translate into a commensurate increase in administrative expenses. Admin expenses were only RM9.1m, or 4.3% of revenue, in 1HFY26 versus 8.2% in FY25. We therefore see scope for operating costs to remain well controlled as the business scales, supporting stronger earnings conversion.
Outlook. We expect DC-related job momentum to remain strong, supported by continued hyperscaler investment in data centre and AI infrastructure. CBHB's substation tender book stands at c.RM1.0b for FY26, and at our assumed win rate of c.60%, this underpins our RM600m replenishment assumption. With six contracts secured YTD and a proven record in delivering HV substations for DC clients, we believe CBHB remains a key beneficiary in this segment. CBHB remains in a net cash position throughout our forecast period, with cash balances of RM142.5m in FY25A and RM126.6m in FY26F, which are sufficient to fund working capital on the enlarged order book without new borrowings.
Forecast Revision. We raise FY26F-FY28F core net profit by 24%, 25% and 25% to RM89.7m, RM97.0m and RM107.0m, respectively. The upgrade primarily reflects our increased confidence in operating leverage following the stronger-than-expected administrative cost performance in 1HFY26. We now assume admin expenses at 4.3% of revenue through FY28F, versus our previous assumption based on the FY25 ratio of 8.2%. Revenue, gross margin and order book replenishment assumptions remain unchanged.
Valuation & Recommendation. We maintain BUY and raise our TP to RM1.31 (from RM1.05), based on P/E of 23.1x, rolled over to our revised FY28F EPS of 5.7 sen. The TP upgrade is therefore entirely earnings-driven, rather than from multiple expansion. We believe the combination of a sizeable order book, continued data centre-related job wins and improving operating leverage provides greater confidence in CBHB's earnings trajectory.
Risks. Delays in data centre project rollouts, execution and manpower constraints on the enlarged order book, cost overruns on fixed-price contracts, and customer concentration in the data centre segment.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.066897 | 4.098439 |
| EUR | 4.625269 | 4.628818 |
| CNY | 0.608190 | 0.608746 |
| HKD | 0.518605 | 0.522139 |
| SGD | 3.180150 | 3.201722 |