PETALING JAYA: ISF Group Bhd (ISF) is positioned to capitalise on Malaysia’s expanding data centre (DC) infrastructure build-out, with the segment set to catalyse its revenue and earnings expansion.

Apex Securities Research noted DC related projects now constitute about 25% of its RM150mil order book, but the 60% of its tender book of about RM500mil is on DC related projects.

Its year-to-date contract wins stand at RM47mil comprising four residential sub-contracts and two DC-related awards, including a RM14.5mil hyperscale DC sewerage package.

“ISF’s margins are holding steady at around 28%, amid a growing contribution from high-margin DC projects.

“Its tender pipeline is at a record RM500mil with some 60% DC-linked, and DC project gross margins of around 50%,” said Apex Securities Research.

“We expect financial year 2027 (FY27) earnings growth to be driven by higher margin DC contract wins, while FY28 should benefit from an increasing contribution from large scale water and sewer infrastructure projects, including nonrevenue water initiatives,” the brokerage said in its latest report on the company.

Applying a 35% conversion rate to this DC-related tender value alone points to some RM105mil of potential contract wins in the second-half of this year, Apex Securities Research noted.

If the tender bids materialise into awards, this would materially lift DC’s share of ISF’s order book and support the flow-through of higher-margin work into FY27 and FY28 earnings.

ISF’s revenue is projected to climb from RM122.6mil in FY26 to RM149.7mil in FY27 and RM168.2mil in FY28.

Core net profit are forecast to grow from RM34.9mil in FY26 to RM42.5mil in FY27 and RM48.8mil in FY28.

In light of these strengthening fundamentals, Apex Securities Research reiterated its “buy” call on ISF with a higher target price (TP) of RM1.03 a share (from 92 sen).

The revised TP is derived from an upgraded target price earnings multiple of 24.2 times (previously 21.5 times) applied to an unchanged FY27 earnings per share forecast of 4.3 sen.

Apex Securities Research justified this re-rating based on ISF’s consistent earnings execution without downward revisions, a structurally superior net cash balance sheet, and a scarcity premium as the only listed pure-play in Malaysia’s DC piping and sewerage market.