"This is especially key in light of Singapore’s increasingly stringent foreign workforce participation rules over the past few years," says Loh, adding that Hong Leong Asia expects that this system could undergo full implementation in 2026.
The company is expanding its production capacity as well. In August, it signed a 25-year lease for a second Jurong Plant. Construction will start in the first quarter next year, and to receive its Temporary Occupation Permit by early 2027.
The plant will have two 6.0 m³ mixers and is designed for higher efficiency and modern automation. According to management, this plant will have a payback period of around 8-9 years, which implies an 11-13% IRR.
Besides the RMC business, Hong Leong Asia holds stakes in two other key entities, both of which are seeing respective growth.
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Last week, BRC Asia, 20% held by Hong Leong Asia, reported better-than-expected FY2025 earnings.
Over at China Yuchai, the engine maker is likely to benefit from favourable policies in China, says Loh.
Besides the existing business of producing engines for heavy vehicles, China Yuchai is seen to enjoy new growth from providing back-up generators for the growing market of data centres.
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Loh, citing industry estimates, notes that the global total addressable market for data centre DC generators could grow from US$7.6 - 9.2 billion in 2025 to US$12 -17 billion by 2033-34 with data centre expansion in Johor driving Asia Pacific TAM to US$3.4 billion by 2029.
China Yuchai sold just 1,000 units to its data centre customers out of over 250,000 units in 1HFY2025, but Loh notes that given how margins and demand are materially higher, this could be an interesting growth engine in the near to medium term.
"In our view, Hong Leong Asia's valuation multiples appear inexpensive as the company is trading at FY2026 earnings and EV/EBITDA of 11.3x and 6.5x respectively," says Loh.
Excluding cash, the company's PE is even lower at 4.8x, based on his 2026 earnings estimates, while delivering an ROE of over 12%.
Loh sees potential for dividends to be increased from the current forecast of 5 cents for FY2025.
Hong Leong Asia shares, as at 10.49 am, gained 1.4% to trade at $2.17, up 128.4% year to date.
