PETALING JAYA: SMRT Holdings Bhd
is expected to see growth in its financial year ending June 30, 2025 (FY25), fuelled by its ongoing expansion of infrastructure and technology solutions across Malaysia, Indonesia and the Philippines.
The company specialises in deploying and managing technology sites, such as smart grid systems for utility companies and automated teller machine (ATM) networks for banks that enhance operational efficiency and connectivity.
Hong Leong Investment Bank (HLIB) Research anticipates that SMRT will maintain its strong pace of site deployments, supported by a robust pipeline in FY25 from partners like Pito AxM Platform (Papi) in the Philippines, Tenaga Nasional Bhd (TNB) in Malaysia, and PT Perusahaan Listrik Negara (PLN) in Indonesia.
SMRT ended FY24 with 4,100 additional managed sites, surpassing the research firm’s forecast of 3,300, bringing its total to a record-high of 25,500 sites.
This was largely driven by strong deployment in the financial services sector.
“Notably, the FY24 quarterly site deployment run rate outpaced that of FY23 and we expect the pace to maintain in FY25, supported by a robust pipeline from Papi, TNB and potential contributions from PLN,” the research firm noted.
HLIB Research expects SMRT’s site deployment to chalk a linear growth in the next two quarters, resulting in stronger quarter-on-quarter earnings on the back of seasonally higher site deployment from the utilities companies.
In Malaysia, the research house estimates that SMRT has connected about 20,400 of TNB’s substations, with a run rate slightly trailing behind TNB’s distribution automation deployment pace.
HLIB Research said sources suggest TNB’s site deployment in 2024 will surpass 2023, indicating higher year-on-year site deployment over the next two quarters.
“With a significant portion of distribution substations in Peninsular Malaysia still unconnected, there is ample job potential coming from TNB in the future.
“The upcoming Regulatory Period 4 2025-2027 could see TNB increasing its capital expenditure, leading to higher yearly site deployments,” it added.
Separately, HLIB Research said SMRT is expanding into the water sector to address the non-revenue water issue, with Pengurusan Air Selangor Sdn Bhd as its first customer.
“Although management has yet to disclose many details, we understand the water segment could yield the highest revenue per site among the group’s various sectors,” it added.
HLIB Research noted that SMRT continues to see ample opportunities in the Indonesian market, particularly with PLN.
As for the Philippine market, SMRT could be in a strong position to negotiate for the job to connect Papi’s remaining ATMs.
HLIB Research has maintained a “buy” call on the stock with an unchanged target price of RM2.28 per share, based on a price-to-earnings (PE) multiple of 30 times FY26 earnings.
“Considering the substantial earnings potential arising from the utilities and financial services sectors and the growing recurring earnings base, we find SMRT’s current FY26 forward PE of 14.9 times to be undemanding, making it a compelling case.
“The proliferation of managed site post sites deployed will lead to a steady growth in the recurring income base,” it concluded.
