RHB Research has maintained its “BUY” recommendation on Binastra Corporation Berhad, raising its target price (TP) to RM3.10 from RM2.72, implying a 57% upside potential and an estimated FY2028 dividend yield of around 5%.
The revised valuation follows Binastra’s strong earnings outlook, supported by its sizeable construction orderbook, increasing exposure to data centre (DC) projects and renewable energy-related works.
Binastra reported a 1QFY2027 core profit of RM35 million, representing a 40% year-on-year increase. The result accounted for 21% of RHB’s full-year forecast and 20% of market consensus estimates.
RHB said the performance was broadly in line with expectations as it anticipates stronger earnings contributions in the coming quarters.
The research house projects Binastra’s earnings to grow at a three-year compound annual growth rate (CAGR) of 19% from FY2026 to FY2029, underpinned by its RM6.8 billion outstanding orderbook as at end-April 2026.
The current orderbook provides earnings visibility of around 4.5 times against revenue.
Data Centre and Solar Projects Drive Growth
The 1QFY2027 earnings improvement was mainly driven by higher contributions from new construction services, particularly solar installation and data centre projects.
However, core net margin declined to 5.8% in 1QFY2027 from 9.8% in 1QFY2025, as data centre and solar installation projects typically carry lower net margins of about 5% to 6%.
RHB expects margins to improve as conventional construction projects in Johor Bahru ramp up and contribute more significantly in the coming quarters.
Binastra is targeting more than RM2 billion in new job wins for FY2027, while RHB’s internal replenishment assumption stands at RM3 billion.
The group has secured RM819.5 million in year-to-date FY2027 contract wins, with future expansion expected to focus more heavily on data centre and renewable energy projects, including large-scale solar developments.
Energy Storage Business Adds Growth Potential
RHB highlighted Binastra’s 51%-owned subsidiary LF Lansen, which provides energy storage and buffer tank solutions for data centres.
The research house expects LF Lansen to achieve a profit after tax (PAT) of RM15 million to RM20 million in FY2027, compared with RM9.2 million recorded for the first 10 months of FY2026.
The subsidiary had an orderbook of RM150 million as at end-April 2026, with Binastra targeting two to three additional data centre projects in FY2027.
Material Cost Pressure Easing
RHB said recent construction material cost pressures appear manageable.
Management noted that industrial diesel prices have eased to around RM3.93 per litre from a peak of approximately RM8 per litre in mid-April during the Middle East conflict.
Meanwhile, Grade 30 concrete prices, which rose by RM20 to RM30 per cubic metre during the conflict and peaked at RM340 per cubic metre in Johor Bahru, have moderated to around RM270 per cubic metre in June.
Steel prices have also declined to approximately RM2,100 per tonne from a peak of RM2,400 per tonne.
Valuation Attractive
RHB made no changes to its earnings forecasts but rolled forward its valuation base to FY2028.
The new TP of RM3.10 is based on a target price-to-earnings (P/E) multiple of 16 times FY2027 earnings per share, with a 2% environmental, social and governance (ESG) premium.
Binastra currently trades at around 12.6 times FY2027 forecast earnings, below the Bursa Malaysia Construction Index’s five-year average P/E of approximately 14.6 times.
RHB believes the valuation discount is unwarranted given Binastra’s diversification beyond non-residential property projects.
Key catalysts include stronger-than-expected order wins, accelerated data centre expansion and improved earnings delivery.
Risks include slower construction activity, margin pressure from cost increases and delays in project execution.
