Cheeding Holdings Berhad reported a core net profit (CNP) of RM7 million for the first quarter of financial year 2027 (1QFY27), which Kenanga Research said was within expectations and accounted for 22% of its full-year forecast.
After adjusting for about RM0.2 million in exceptional items, the group’s quarterly CNP declined 25% quarter-on-quarter (q-o-q), mainly due to lower revenue recognition from its underground utilities engineering, procurement, construction and commissioning (EPCC) projects.
Revenue fell 35% q-o-q to RM19 million, as several newly secured projects remained at the early stages of their S-curve recognition.
Higher other income, which Kenanga believes was largely attributable to interest income from unutilised initial public offering (IPO) proceeds, partly cushioned the weaker revenue contribution.
Despite the lower revenue, CNP margin expanded by about five percentage points to 39%. Kenanga attributed the improvement partly to the recognition of around RM2 million in variation orders (VOs) from the Cyberjaya project and a higher revenue contribution from overhead utilities projects.
The group declared an interim dividend of 0.30 sen per share for the quarter
On a year-on-year (y-o-y) basis, CHEEDING’s CNP increased 8%, supported mainly by higher revenue recognition from overhead utilities EPCC projects and lower administrative expenses.
Revenue increased 21% y-o-y, although CNP margin moderated by about four percentage points to 39%.
Kenanga said the lower margin was likely due to a lower level of project cost savings compared with 1QFY26.
Kenanga expects CHEEDING’s earnings to remain resilient in the coming quarters, supported by the progressive recognition of its existing RM148 million order book.
The order book comprises overhead utilities at 63%, substations at 21%, underground utilities EPCC at 16% and miscellaneous projects at 1%.
However, order book replenishment was relatively slow during the first half of calendar year 2026, partly due to the festive-period slowdown.
Based on its channel checks, Kenanga said tender activity by Tenaga Nasional Bhd (TNB) has remained active since May.
Assuming a typical tender evaluation period of around six months, the research house expects order replenishment to improve around November to December 2026.
CHEEDING’s current tender book stands at approximately RM434 million.
Kenanga also highlighted the group’s net cash position, which puts it in a strong position to fund upfront project costs and participate in larger opportunities arising from national grid modernisation and transmission infrastructure investments under the fourth regulatory period (RP4).
The research house maintained its existing order win assumptions pending CHEEDING’s briefing on Aug 27, which it expects will provide greater visibility on potential new awards before any forecast revisions are made.
Kenanga maintained its RM0.79 target price for CHEEDING, based on 18 times its FY27 forecast earnings per share, after incorporating figures from the group’s annual report and a 3% environmental, social and governance (ESG) premium.
The research house said its investment case for CHEEDING is supported by the company’s rare 500kV licence, the highest voltage class and a prerequisite for backbone grid upgrades and ASEAN Power Grid corridors.
It also highlighted the group’s integrated EPCC capabilities covering overhead, underground and substation segments, its track record of delivering more than 20 national infrastructure projects and core net margins of more than 20%, which are above sector averages.
Kenanga said CHEEDING’s focus on higher-margin overhead transmission projects and its asset-light business model further support its earnings profile.
Key risks to the investment view include customer concentration, reliance on regulated infrastructure spending, project execution and delays, as well as risks associated with fixed-price contracts.
