According to the analyst, TSE is a beneficiary of the strong domestic construction demand. “As a long-established cable manufacturing player, TSE has benefited from various mega projects in the past such as Thomson-East Coast MRT Line, Tuas Mega Port, and Changi Airport T4, and remains well-positioned to capitalise on the ongoing construction boom,” he adds.
Apart from the booming construction demand, Syahril notes that TSE is becoming a regional data centre play as it benefits from the wave across its cable and electrical component segments.
“It has supplied over 70% of Singapore’s data centres, supporting steady revenue growth in FY2025 and 1HFY2026, alongside public construction activity in Singapore and Malaysia,” the analyst states.
Syahril believes that with 1 gigawatt of data centre capacity in the development pipeline for Singapore, TSE is set to benefit from the next wave of demand.
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Meanwhile, TSE has been expanding its footprint in the renewable energy space via the acquisition of solar equipment distributors Integra RE in Thailand and the Philippines.
From Syahril’s perspective, he believes this will allow TSE to establish business relationships with RE players across both markets where it previously had no direct presence.
Despite the solid underlying demand for TSE’s cable and electrical component segment, Syahril notes that TSE’s margins are vulnerable to the swing in copper. “In 1HFY2026, the group recorded an $11.8 million onerous contract provision following a sharp surge in copper prices, which compressed margins,” Syahril states.
Syahril adds that while further price increases may weigh on earnings, this is partly offset by higher-margin spot contracts and a weaker USD.
“We expect provisions to peak at $18.5 million in FY2026, compared to $12.6 million back in 1HFY2026, before reversing by $5.3 million in FY2027 and FY2028, and believe the market should look beyond this, given TSE’s strong fundamentals,” Syahril predicts.
With that, the analyst expects TSE’s core earnings to grow 33% y-o-y in FY2026 on strong contract delivery, despite margin pressure expected in 2HFY2026.
“Growth would then slow to 3.2% y-o-y in FY2027 due to fulfilment of onerous contracts, before recovering to 13.8% y-o-y in FY2028 as margins normalise with stabilising copper prices and higher-margin spot contracts,” Syahril adds.
“Our target price of 75 cents on TSE is pegged to 12 times FY2027 P/E ratio, at a 10% discount to its closest peer, due to its relatively small size,” Syahril concludes.
As at 11.50am, Shares of TSE were unchanged at 54 cents.
