Data centre jobs offer opportunities for HE Group’s advancement

PETALING JAYA: HE Group Bhd’s prospects appear more promising heading into the second half of this year (2H25), on the back of strong pipelines of data centre projects and improved visibility on award timelines, analysts say.

Phillip Research has set its order book replenishment assumptions for the electrical engineering services provider at RM120mil, RM230mil and RM250mil for this year (FY25), FY26, and FY27, respectively, supported by a sizeable tender book of RM675mil.

According to the research house, HE Group’s tender book is expected to expand further as tender activity gains momentum.

However, taking into account timing delays in new contract awards, Phillip Research has revised down its earnings forecasts for FY25 and FY26 by 1% and 3%, respectively.

HE Group earnings estimate for FY27, however, has been revised upwards by 1%.

“While the upcoming 2Q25 results are expected to remain soft with core net profit likely to be steady quarter-on-quarter at RM3mil, we encourage investors to look beyond near-term softness.

“We anticipate a meaningful earnings recovery in FY26 (34% year-on-year) as new project rollouts gather pace.”

Phillip Research said that data centres continues to be a key focus for HE Group, constituting 80% of the current tenders, with the remaining 20% spread across semiconductors and medical devices.

The research house noted that the group marked its entry into the data centre segment with a RM3mil fit-out job recently awarded by a US-based operator, which is expected to serve as a “critical reference project, enabling HE Group to demonstrate its capabilities and establish its track record”.

Malaysia’s data centre segment recorded a cumulative contract value of RM7.9bil last year, and RM4.5bil in new contract wins in 1H25, which is 57% of last year’s full-year value.

Growing momentum in overall data centre contract activity signals by other major operators in 2H25 brings more opportunities for HE Group.

The group also expects a rise in semiconductor-related tenders in 3Q25, supported by several of its semiconductor clients’ plans to expand or ramp up production.

Meanwhile, the medical segment offers an encouraging outlook for the group, with healthy factory expansion plans scheduled for 2H25.

Phillip Research said that the company’s current share price, at an undemanding valuation of 10 times 2026’s price-earnings ratio and a discount to sector average of 14 times, represents an attractive opportunity for investors seeking exposure to structural multi-year data centregrowth themes.

The research house has maintained its “buy” rating on the stock, with a higher target price of 51 sen from 45 sen previously.