PETALING JAYA: Ann Joo Resources Bhd’s recent contract win for the design and construction of electrification works for the East Coast Rail Link (ECRL) feeder stations is seen as a positive step, as it marks Ann Joo’s entry into the utility-infrastructure sector.
TA Research, which views the job win positively, said this move marks Ann Joo’s first step into vertical expansion, which would complement its existing core operations.
“Ann Joo is on the verge of entering the utility-infrastructure sector to capitalise on the increasing demand for electricity, driven by robust population growth and rising foreign direct investment in the data centre industry,” the research house noted.
Last week, Ann Joo, together with its partner PT Lumintu Insan Mandiri, secured a contract valued at RM297.9mil from Tenaga Switchgear Sdn Bhd, a subsidiary of Tenaga Nasional Bhd
(TNB).
Key components of the project include a 132 kilovolt switching station, overhead transmission lines, underground cable installation and associated work for the ECRL feeder stations.
The project is expected to be completed by May 31, 2026.
TA Research highlighted that partnering with PT Lumintu, an Indonesia-based company specialising in engineering, procurement and project management services, will enable Ann Joo to expedite its diversification process and better position itself for domestic utility-infrastructure projects.
The research firm believes Ann Joo’s venture into the sector aligns well with TNB’s indicative capital expenditure of about RM15bil annually for upgrading the country’s power grid, as outlined in the New Energy Transition Roadmap (NETR).
“This development will stimulate demand for steel products, as more steel-based wiring and cabling will be required to support the grid upgrades,” it added.
Last month, Ann Joo Steel Bhd, a subsidiary of Ann Joo Resources, and Solarvest Holdings Bhd, a leading clean-energy expert, successfully completed the installation of a 3.3 megawatt-peak rooftop solar photovoltaic system at AJS’ manufacturing plant in Seberang Perai, Penang.
TA Research said the partnership leverages PT Lumintu’s construction expertise and allows Ann Joo to internalise its steel supply chain, thereby strengthening its market position.
Despite the positive outlook, TA Research has maintained their earnings forecasts, pending further details on the consortium’s shareholding structure.
Following the recent contract win, TA Research revised its target price-to-earnings ratio from 11 times to 12 times, resulting in a new target price of RM1.64 a share.
The research house said it believes the valuation is fair, considering Ann Joo’s potential as a key supplier of steel materials for the Penang light rail transport project, supported by its cost competitiveness from its steel-making plant in Prai, Penang.
Moreover, it said the increasing construction activity, due to the revitalisation of the property sector, is driving higher demand for steel products.
Additionally, the upgrading of the power grid, in line with the government’s energy goals, further boosts demand for steel.