EITA Resources Berhad: A Hidden Gem in Malaysia's Infrastructure Boom

The rapid expansion of Malaysia's infrastructure sector—driven by projects like the Singapore-Johor Rail Link (RTS), data center construction booms, and grid modernization—has created fertile ground for companies with specialized expertise. Among these, EITA Resources Berhad (EITA) stands out as a key player, offering investors exposure to a pipeline of high-margin contracts while demonstrating improving profitability and shareholder-friendly policies. With a robust order backlog, dividend increases, and a fair value loss on derivatives now in the rearview, the stock presents a compelling buy case ahead of its Q3 2025 results.

Dividend Growth Signals Financial Confidence

EITA's interim dividend of 1.50 sen per share (up from 1.25 sen in 2024) marks a clear shift toward rewarding shareholders. This increase, paired with rising net profits—Q2 2025 net income rose 106% year-on-year to RM3.44 million—reflects stronger operational discipline. The dividend hike also underscores management's confidence in sustaining cash flows amid improving margins.

Order Backlog: Fueling Growth in Malaysia's Infrastructure Surge

EITA's order backlog, bolstered by contracts with Tenaga Nasional Berhad (TNB) and Sarawak Energy Berhad, is a critical catalyst for future earnings. Key wins include:
- A RM56.3 million substation rehabilitation project from TNB (secured December 2023), which will boost revenue through 2025.
- Two RM58.35 million substation projects with Sarawak Energy (2022), extending into 2024–2025.
- A RM47.9 million TNB substation project (March 2024), set to contribute over the next two years.

These contracts, totaling over RM160 million, align with Malaysia's RM90 billion TNB grid expansion plan through 2028. With data centers and industrial parks driving demand for high-voltage infrastructure, EITA's expertise in substation construction and busduct systems positions it to secure further orders.

Fair Value Loss on Derivatives: A One-Time Drag, Not a Structural Issue

Critics have flagged a RM10.8 million fair value loss on derivatives in late 2024, but this appears to be an isolated event. The loss likely stemmed from volatility in foreign exchange or commodity hedges—a common risk for firms with overseas operations or raw material exposures. Importantly:
- The loss did not recur in Q2 2025 results, where profitability surged.
- Management's appointment of CFO Chong Wai Foon (with 22 years of experience) suggests a focus on financial risk mitigation.
- Core operations remain strong, with segments like elevator systems and electrical security systems posting margin improvements.

Strategic Positioning: Beyond Malaysia

While domestic contracts are vital, EITA's ambitions extend abroad. Its busduct solutions—critical for data centers and industrial parks—are gaining traction in markets like Indonesia and Vietnam, where digital infrastructure spending is booming. Additionally, the company's elevator maintenance business benefits from rising demand in Johor's real estate sector, driven by the RTS-linked Special Economic Zone.

Risks to Consider

• Macro Uncertainty: U.S. tariffs and global commodity prices could affect input costs.
• Execution Risks: Delays in substation projects could impact cash flow.

Investment Thesis: Buy Ahead of Q3 Results

EITA's Q3 2025 results, due in late September, are likely to reflect:
1. Sustained revenue growth from TNB/Sarawak contracts.
2. Margin expansion as operational efficiencies take hold.
3. No recurrence of the derivatives loss, reinforcing financial stability.

At a current price of MYR0.62, the stock trades at just 6.2x trailing P/E, well below its historical average and peers in the electrical sector. With a MYR0.0424 EPS for the first half of 2025, a full-year EPS of MYR0.10–0.12 is achievable, implying a fair value of MYR0.85–1.00.

Recommendation: Buy EITA Resources Berhad ahead of Q3 results. The combination of strong order visibility, dividend growth, and a resolved derivatives issue positions it as a top pick in Malaysia's infrastructure boom.

This article is for informational purposes only. Investors should conduct their own research or consult a financial advisor.