• Critical secured a mechanical and electrical (M&E) contract worth RM63m for a semiconductor project in Penang

• We are pleased with this win, being Critical’s second major contract awarded this month. The cumulative new win of RM145m in Oct24 brings the estimated orderbook to RM267m

• Maintain BUY rating and an unchanged target price of RM1.65

Secured RM63m semiconductor M&E contract

Critical announced that it has clinched a RM63m M&E contract from IJM Construction. The contract involves the supply, delivery, installation, testing, commissioning and maintenance of M&E services for a new semiconductor plant for a US-based MNC in Penang. Critical will undertake the role as a mechanical, electrical and process utility (MEP) subcontractor for this project. The work is expected to commence on 1 Nov 24 and is slated for completion by 17 Aug 25.

Positive on this latest win

This latest job award brings Critical’s total contract wins in Oct24 to RM145m, increasing its orderbook to an estimated RM267m– close to its historical record high. We are encouraged by this win, as the recent uptick in contract activity within the semiconductor sector points to a robust project pipeline. Apart from the semiconductor segment, we expect to see an increase in data-centre MEP related contract awards in the coming months, following the high amount of contract awarded to main contractors. This is expected to further drive Critical’s orderbook.

Reiterate BUY with unchanged TP of RM1.65

With this contract win, Critical is on track to meet our FY25 revenue forecasts. We are keeping our earnings forecasts unchanged, with this award falling under our order book replenishment target. We reiterate our BUY rating and target price of RM1.65, based on 20x PE multiple on FY25 EPS. We expect further valuation re-rating, supported by strong order visibility, and positive tender outlook, which we believe have yet to be fully reflected in the current share price. Key catalysts include continuous strong contract wins momentum. Key downside risks include: slower-than-expected contract replenishment, any unforeseen project delays, and margin pressure.

Source: Philip Capital Research - 15 Oct 2024