• We remain upbeat on MN’s prospects following our recent site visit to their data centre power infrastructure facility in Johor

• We expect stronger FY25E earnings trajectory, supported by quicker project progress, and robust tender pipelines

• Maintain BUY rating and RM1.20 target price

Visited MN’s data centre power infrastructure facility

We recently organized a site visit to MN’s data centre power infrastructure projects in Johor. We observed that progress for Customer A’s RM143m 275kV consumer landing station (CLS) work package in Plot 4 has reached 20% completion, with the project commencing in Jun24 and slated to be completed by Jul25. The RM98m horizontal directional drilling (HDD) contract has progressed to 75%, from 45% in 4QFY24, and is on track for handover by Jan25. Combined, these projects account for c.33% of MN’s outstanding orderbook of RM611m.

Major customer project to drive earnings growth

We are positive on MN’s orderbook replenishment, supported by customer’s aggressive expansion plans. Management is exploring the possibility of initiating early work for a new site from its major customer, similar to plot 4 in terms of MW capacity by end CY24, prior to being awarded the power infrastructure contract. MN could potentially benefit from additional variation order due to increased work requirements, amounting to RM10m, which would represent additional 7% of the current contract value. In addition to Johor, MN see opportunity to secure new contract from its customer’s newly secured Bukit Jalil project site, which has a planned 80–120MW capacity, translating to a contract value of RM20–50m. We expect stronger FY25E earnings momentum, driven by quicker project recognition from ongoing contracts. We anticipate continued robust contract opportunities from Customer A, fuelled by its aggressive data centre development pipeline.

Maintain BUY

We reiterate our BUY rating and RM1.20 target price, pegged to 20x PE multiple on fully diluted CY25 EPS. We like MN as a proxy for Malaysia’s expanding power infrastructure and strategic exposure in the rapidly growing DC and solar sectors. Key risks to our BUY call include slower-than-expected project rollouts affecting order book replenishment and unforeseen project delays.

Source: Philip Capital Research - 3 Oct 2024