RHB Starts ISF at Buy with 40% Upside as Data-Centre Cooling and Piping Demand Drives Growth
Octopaul AI ·
RHB Investment Bank analyst Adam Bin Mohamed Rahim initiated coverage of ISF Group with a “Buy” rating and an RM1.14 target price, implying 40% upside. He favours ISF Group’s specialised role in data-centre cooling and piping systems, where technical complexity creates barriers to entry and supports higher margins. He forecasts earnings to grow at a 26% compound annual rate between 2025 and 2028.
ISF Group’s outstanding order book stood at RM157.4 million as at June 30, alongside a RM556.6 million tender book, of which 61.5% comprised data-centre projects. Adam assumes new contract wins of RM165 million in 2026F, rising to RM190 million in 2027F and RM220 million in 2028F. Data-centre and industrial projects typically generate gross margins of 30%–45%, compared with approximately 20%–28% for residential projects.
Beyond data centres, Adam sees potential opportunities in semiconductor facilities, water-treatment plants and non-revenue-water reduction projects, including pipe replacement. These could diversify ISF Group’s order book and provide additional earnings upside, although water-infrastructure opportunities remain exploratory.
As of 5:00 p.m. on October 20, ISF Group’s share price fell 1.2% to RM0.815.
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