KUALA LUMPUR (April 7): Phillip Research has initiated a 'buy' call on CBH Engineering Holdings Bhd (KL:CBHB) with a target price of 91 sen, as the house sees the group as a key beneficiary of Malaysia’s accelerating power infrastructure investment cycle driven by the rapid expansion of data centres.
In a research note on Tuesday, Phillip Research said the target price implies an 85.7% upside or nearly double its current price.
CBH shares were unchanged at 49 sen in early trade on Tuesday, valuing the group at some RM921 million.
The research house expects the mechanical and electrical (M&E) engineering specialist’s earnings to grow at a compound annual growth rate (CAGR) of 38% between 2025 and 2028, underpinned by sustained demand for substation and grid connectivity works linked to data centre developments.
“Structural tailwinds from rising data centre development, growing electricity demand and accelerating grid modernisation provide a strong multi-year growth runway for CBH,” the note said.
CBH, which specialises in the design and construction of substations and electrical distribution systems, is seen as a direct proxy to Malaysia’s ongoing power infrastructure upcycle as the country strengthens its position as a regional data centre hub.
Phillip Research estimates a RM5 billion to RM7 billion addressable market opportunity in substation projects over the next five years, supported by an estimated 5GW data centre pipeline.
The research house noted that data centres are highly power-intensive and require reliable, large-scale electrical infrastructure, including redundant substations, high-voltage transmission lines and grid reinforcements.
This, it said, creates a sustained demand environment for contractors such as CBH.
As at February 2026, CBH’s outstanding order book stood at RM592 million, with about 90% tied to data centre-related substation projects and largely expected to be recognised in the financial year ending Dec 31, 2026 (FY2026).
Phillip Research also highlighted that the group’s tender book currently stands at RM830 million, while assuming an annual order book replenishment of RM700 million to RM800 million over 2026 to 2028.
On earnings, the research house forecasts net profit to rise from RM48 million in FY2025 to RM79.4 million in FY2026, before climbing further to RM95.3 million in FY2027 and RM115 million in FY2028.
The note added that CBH’s above-industry margin profile and asset-light business model should continue to support returns, with the group maintaining a net cash position of about RM150 million as at Dec 31, 2025.
Still, Phillip Research flagged key risks including its dependence on continued order book replenishment, concentration in data centre-related jobs, reliance on subcontractors, and intensifying competition from both local and foreign players.