KUALA LUMPUR (June 7): Mercury Securities Bhd has recommended investors to 'subscribe' to UUE Holdings Bhd at an initial public offering (IPO) price of 24 sen, with a fair value of 46 sen, based on 13 times earnings per share for the financial year ending Feb 28, 2025 (FY2025), translating into a potential upside of 90% to the IPO price.
In a note on Friday, the research house said its target valuation of 13 times price-earnings (P/E) is appropriate for a small-cap construction engineering company (vis-a-vis 19.7 times P/E for the Construction Index).
Mercury said key catalysts for UUE include strong earnings delivery and major contract wins.
“We note that listed comparable peers such as MN Holdings Bhd (KL:MNHLDGV) (+41% year-to-date) and Jati Tinggi Group Bhd (KL:JTGP) (+27%) are trading at 22 to 29 times P/E, amid strong earnings growth expectations stemming from recent massive investment in data centres and renewable energy projects in Malaysia.
UUE is principally involved in the provision of underground utilities engineering solutions for the electricity supply and telecommunications industry.
Mercury said with approximately 80% of UUE’s revenue coming from the electricity supply industry, it is not surprising that UUE has greatly benefited from Tenaga Nasional Bhd’s (KL:TENAGA) increased capital expenditure (capex) spending in recent years to strengthen the national grid infrastructure.
“With National Energy Transition Roadmap initiatives further driving elevated capex spending by Tenaga in the coming years, we believe this augurs well for UUE, and expect its revenue to grow at a double-digit three-year compound annual growth rate of 23% over FY2023-26,” Mercury said.