KUALA LUMPUR (Oct 30): MyDCD Bhd may have 91% upside to its listing price though there are risks that investors of the mechanical and electrical engineering firm have to watch out for, according to an analyst.
Earnings at MyDCD, which focuses on work for data centres, could grow 22% annually on average over the next three years, driven by outstanding orders totalling RM1.32 billion, potential new jobs and growing higher-margin recurring maintenance contracts, M+ Global said in an unrated note.
“We view this as one of MyDCD’s moats, as data centre owners and main contractors typically prioritise proven delivery on mission-critical facilities,” the research house said.
MyDCD mainly provides mechanical, electrical, plumbing and fire protection — a group of services known as MEPF that covers a building's indoor systems such as air-conditioning, electrical distribution, water supply, and fire alarms.
The company’s revenue for the latest financial year ended June 30 came entirely from working on data centres, which are now expanding at an unprecedented rate in Malaysia and in the region to cater to demand for artificial intelligence (AI) and advanced computing.
MyDCD’s fair value would be RM1.07, according to M+ Global, compared to its ACE Market initial public offering (IPO) price of 56 sen per share. Applications for the IPO will close on Nov 2 and listing is scheduled for Nov 17.
At RM1.07, MyDCD would be valued at about 20 times its forward earnings, within its peers in the MEPF business now trading at multiples of between 20 and 21 times, the research house noted.
However, “any slowdown in data centre investments, whether due to constraints in power and water supply, land-use and approval requirements, or tighter controls on AI chip exports, could delay project awards and reduce opportunities for MEPF contractors”, M+ Global warned.
Further, MyDCD is dependent on Binastra Corporation Bhd (KL:BNASTRA) for 62% of the value of the jobs on hand while the top five customers contributed 98% of revenue in the past one year, presenting customer concentration risk, the house flagged.