• 1QFY25 core net profit reached another record-high of RM10.1m (+155% YoY), in line with expectations

• Expect FY25 to be another record earnings year driven by its RM601m order book (2.4x FY24 revenue)

• Maintain BUY rating with an unchanged TP of RM1.20

1QFY25 set another record earnings– in line

Excluding RM1.8m financial assets impairment loss and RM1.2m share-based compensation, MN Holding’s (MN) 1QFY25 core earnings reached another record-high of RM10.1m (+155% YoY). This was on the back of higher revenue of RM103m (+87% YoY), driven by increased contributions from both underground utilities (+116% YoY) and substation engineering (+63% YoY) segments. EBITDA margin improved 1.2ppts YoY to 13.4%, as high-margin data centre (DC) contracts accelerate in progress. Overall 1QFY25 results came in at 31% and 32% of our and consensus full-year estimates, respectively. This is within our expectations as we expect a slowdown in 2HFY25 due to the completion of selected contracts from customer A, a China-based DC operator, including the underground cable project. MN declared its maiden 0.15sen interim DPS.

Expect sustained 2QFY25, but 2HFY25 earnings to taper off

1QFY25 revenue rose 40% QoQ to RM103m, driven by more substantial contract progress billings from Customer A. The EBITDA margin improved 1.9ppts to 13.4% driven by on-going DC projects. The effective tax rate normalized to 29% (-3ppts) due to reduced non-deductible quarterly expenses. We expect sustained earnings momentum in 2QFY25, before tapering off in 2HFY25. The group’s outstanding order book stands at RM601m (2.4x FY24 revenue), with 30% made up from customer A.

Maintain BUY with RM1.20 target price

We tweak our earnings forecasts by 1% on housekeeping adjustments and imputing 0.3sen DPS for FY25–27E. We reiterate our BUY rating and RM1.20 target price, based on an unchanged 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 delays.

Source: Philip Capital Research - 26 Nov 2024