Wawasan Dengkil's Strategic Contracts: A Catalyst for Recovery and Growth in Malaysia's Infrastructure Boom

The Malaysian government's push to modernize its infrastructure, including telecom networks and public transit, has positioned Wawasan Dengkil Holdings Berhad (0347) as a key beneficiary of the nation's construction boom. With two new contracts totaling RM53.81 million secured in June 2025, the company is now primed to enhance earnings visibility, reduce debt, and drive a recovery in its share price, which trades below its initial public offering (IPO) level. This article dissects the near-term financial catalysts and valuation upside, arguing that the stock offers compelling upside for investors with a 12-month target price of RM0.40.

Key Contracts: Fueling Earnings and Reducing Gearing

Wawasan Dengkil's recent wins—a RM44.76 million fiber optic infrastructure project for PG LinkaranFiber Sdn Bhd and a RM9.05 million earthworks contract for TG Malim Hi-Tech Park—underscore its niche expertise in critical infrastructure sectors. The fiber optic project, spanning 19 months from June 2025 to early 2026, targets southern Peninsular Malaysia, aligning with Malaysia's National Fiberization Plan. The earthworks contract, to be completed by December 2025, supports the development of a high-tech park in Perak.

These contracts directly address two high-growth areas: telecom infrastructure and construction for tech parks. Their combined value of RM53.81 million represents approximately 15% of the company's FY2025 revenue to date (based on RM346 million in confirmed projects as of December 2024). By executing these projects efficiently, Wawasan Dengkil can boost its earnings per share (EPS) and net asset value per share (NAV), while reducing reliance on debt.

Financial Catalysts: Earnings Visibility and Gearing Improvement

The contracts will contribute meaningfully to Wawasan Dengkil's financial metrics:
- EPS Boost: Assuming a 15% profit margin (in line with Q3 2025's 15.13% gross margin), the RM53.81 million contracts could add ~RM8 million in net profit over their lifetimes. With 540 million shares outstanding post-IPO, this translates to an EPS contribution of ~1.5 sen, or ~10% of FY2025's projected RM0.15 EPS.
- Gearing Reduction: Proceeds from the projects will help reduce total borrowings, currently at RM17.8 million. The company's IPO in March 2025 already allocated RM5.28 million to debt repayment, and these new contracts could further lower the debt-to-equity ratio, improving financial flexibility.

The stock currently trades at RM0.23, below its RM0.25 IPO price, offering a valuation discount of 8%. This presents a buying opportunity as execution risks are mitigated by government-backed projects, which typically face fewer delays or cancellations.

Valuation Upside: Target Price RM0.40

Analysts at TA Securities have already projected a RM0.28 target, citing a forward P/E of 12.5x. However, Wawasan Dengkil's strong order book (RM380 million as of December 2024, plus the new RM53.81 million) and its alignment with Malaysia's RM1.6 billion tender pipeline suggest higher upside.

The company's P/E of 11.6x (based on trailing EPS) is below the sector average of 14–16x, indicating undervaluation. If earnings grow to RM0.20 per share by FY2026 and the P/E expands to 15x, the stock could reach RM0.30, with further upside to RM0.40 if major projects like the RM123 million LRT Line 3 (already under execution) deliver as expected.

Risks, But Mitigated by Strong Backing

Potential risks include delays in project timelines or cost overruns. However, the government's commitment to infrastructure spending—evident in its RM1.2 trillion 12th Malaysia Plan (2021–2025)—reduces execution risks. Wawasan Dengkil's track record of delivering projects like the Bidor Solar PV (RM9.4 million) also builds confidence in its operational capabilities.

Conclusion: Buy with a 12-Month Target of RM0.40

Wawasan Dengkil's June 2025 contracts are near-term catalysts for earnings growth and debt reduction, addressing the primary concerns of its undervalued share price. With a debt-laden market and Malaysia's infrastructure pipeline remaining robust, the company's niche in telecom and construction infrastructure positions it well to capitalize. Investors should consider a buy rating at current levels, with a 12-month target price of RM0.40, implying 74% upside. Monitor the company's Q3 2025 earnings report (August 2025) and progress on its fiber optic project for further confirmation.

Investment Thesis: Government-backed projects + strong order book + undervaluation = a compelling risk-reward setup.