PETALING JAYA: A sequentially weaker fourth quarter of financial year 2024 (4Q24) can be expected for HE Group Bhd as projects are nearing completion.
However, it is actively bidding for its maiden data centre (DC) project and if this materialises, it will be a positive development as it solidifies its position in this new expansion area.
Phillip Research said it likes HE Group’s strategic exposure in structural growth sectors, including the semiconductor and DC segments.
It expects new order replenishment prospects to remain supported by its RM475mil tender book, largely driven by semiconductor and DC projects representing 60% and 40%, respectively.
The research house maintains its “buy” call on the stock with a target price of 90 sen per share, which is pegged to target 20 times multiple on 2025 earnings per share.
The key risks cited for its call include slower-than-expected order book replenishment, unforeseen delays and project margin cost pressure.
It made no changes to its forecast after the 3Q24 financial results. HE Group, an electrical engineering services provider, recorded a core net profit of RM4.8mil in 3Q24, bringing the core earnings for the nine months of 2024 to RM13.1mil, representing 85% of Phillip Research’s forecast.
The earnings were primarily driven by higher revenue from the electrical equipment hook-up and retrofitting segment.
The earnings before interest, tax depreciation and amortisation margin declined to 10.9% due to timing differences in cost recognition for certain work.