Making its debut on Bursa Ace Market today, MN Holdings Bhd is engaged in underground utilities and substation engineering services in Malaysia. MNHB is CIDB, TNB and Sijil Perolehan Kontrak Kerajaan certified G7 contractor with the ability to participate in tenders for private and Government projects of unlimited contract value throughout Malaysia. BUY with a target price of RM0.30 based on 10x PER to its FY23F EPS of 3.0sen. Its valuation is premium to its peers, given its higher profit margin, exclusivity to some key customers and outstanding orderbook.

With more than 13 years experience in the power utilities construction industry in Malaysia, the Group has completed 375 contracts, with a cumulative value of RM261.0m. MNHB mainly serves customers in the power, gas, sewerage and telecommunications industries in Malaysia who are primarily main contractors for power projects, property developments and industries that require services and solutions to enable the supply of power to specific locations and/or premises.

In FY2021, 80.5% of its revenue is generated from its underground utilities engineering services while another 19.5% of its revenue is contributed by its substation engineering services. MNHB is the exclusive partner to Rentak Segar Sdn Bhd (a TNB-approved main contractor for underground power utilities construction) and Impiana Mahir Sdn Bhd for underground utilities engineering services and solutions projects. MNHB has an unbilled order book of RM172.2m as of 9 March 2022. The unbilled order book comprises of RM135.4m of underground utilities engineering and RM36.8m of substation engineering works.

Of the RM17.2m IPO proceeds, the Group plans to use RM5.84m for machinery and equipment to expand the scale of projects. Together with its potential joint venture partner, the Group also intends to venture into piped water and sewerage distribution segment by leveraging on current capabilities. Following the appointment as the distributor of Lucy Electric’s range of neutral disconnectors in Malaysia, the Group will intensify distribution activities and venture into the assembly of neutral disconnectors for sale and distribution in Malaysia. The Group is also eyeing to secure more LSS substation projects to strengthen the substation engineering services and solutions segment.

We are optimistic on the outlook for the power infrastructure utilities industry from (i) long term economic growth; (ii) growing demand for other utilities; (iii) population growth and urbanisation; (iv) opportunities from Malaysia’s renewable energy generation targets; (v) growing demand for electricity; and (vi) government initiatives to strengthen utility infrastructure in Malaysia. Hence, we expect MNHB to register net earnings of RM11.0m and RM12.4m for FY22 and FY23 respectively. Its balance sheet is also healthy with net cash of RM21.1m post IPO with utilisation of IPO proceeds.

Source: Rakuten Research - 28 Apr 2022