KUALA LUMPUR (Jan 30): Phillip Capital has ascribed an 18 times price-earnings multiple on earnings per share estimated for the financial year ending Dec 31, 2024 (FY2024) for HE Group Bhd, and derived a fair value of 52 sen for the stock.

In a note on Tuesday, the research house said HE Group stands to benefit from the rise in foreign direct investment in sectors such as semiconductors, electrical and electronics, data centres, and medical.

The research house does not have a rating for the ACE Market-bound stock.

“We project a three-year earnings compound annual growth rate of 46% over FY2021 to FY2024, driven by its RM212 million order book.

“Our valuation multiple is at about 10% discount to its closest comparable peers listed on Bursa Malaysia, such as MN Holdings Bhd, Critical Holdings Bhd, and Kelington Group Bhd.

“Key risks include a delay in the end-user expansion plan affecting order book replenishment, unforeseen project delivery delays, and higher raw material prices (for copper and aluminium),” the research firm said.

Phillip Capital said HE Group had an outstanding order book value of RM212 million as of December 2023, with about 90% to be recognised in FY2024, potentially doubling the group’s profit for the year.

“We gather that the group is currently tendering for about RM400 million of jobs, which will likely be finalised in the first half of FY2024.

“The management guided that the majority of the tenders (about 80%) are for semiconductor projects, with the remaining 20% are related to data centre projects. Historically, the tender success rate is 15% to 20%,” the research house said.

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