CBH Engineering Holdings Bhd (CBHB, 0339) is officially listed on the Bursa Ace Market today. Specialising in electrical engineering services, CBHB focuses on electricity supply distribution systems for substations and end-user premises. We project CBHB to register core net earnings of RM45.8m and RM56m for FY25F and FY26F. BUY with a fair value of RM0.44, premised on a weighted average 18x PER (regional sector average) on FY25F EPS.

CBHB boasts over 30 years of experience in the M&E engineering industry, firmly establishing its presence in the market. Currently, the company manages 12 ongoing contracts with an unbilled order book of RM203.7m, largely driven by data centre projects as it leverages prevailing industry trends. Looking ahead, CBHB shows strong growth potential with a robust pipeline of 22 tenders valued at RM559.7m.

To support future M&E engineering projects, CBHB is channelling 46.2% of its IPO proceeds into business expansion, focusing on the procurement of critical equipment and components, including power cables, transformers, and switchgears. Sourced from its robust network of 178 approved suppliers, these investments will significantly enhance the company’s operational capacity, positioning it for sustained growth and greater project scalability.

Meanwhile, CBHB intends to recruit an additional 11 experienced engineers, expanding its team from 73 currently. This strategic move will enhance the company’s (i) ability to manage larger- scale M&E engineering projects, (ii) efficient execution, (iii) adherence to high-quality standards, and (iv) ability to capitalize on opportunities in a growing market.

Malaysia being a hub for energy and chip manufacturing aligns with the data centre industry’s robust growth over the next five years, driven by major investments from tech giants like Google, Microsoft, and Amazon. Locally, the Malaysia Digital Economy Blueprint underscores the government's commitment to providing extensive, high-quality digital infrastructure, including data centres.

All in all, CBHB maintains a strong balance sheet with a net cash position backed by its historical financial performance. This solid foundation ensures the company is well-equipped to sustain financial strength and drive long-term growth post- listing.

Source: Rakuten Research - 16 Jan 2025

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