Binastra spreads its wings 

BINASTRA Corp Bhd has for long been known as a major building contractor.

However, it has now gone into data centres (DCs), renewable energy (RE) and engineering, procurement, construction and commissioning (EPCC), representing an effort to broaden its earnings base and position the group for its next phase of growth.

Speaking to StarBiz 7, managing director Datuk Jackson Tan Kak Seng says the aim is to achieve a good balance of jobs between construction and its EPCC, DC and green energy wins.

At the moment, the breakdown is about 70%-30%, with the former being construction jobs.

“Our aim is to achieve a 50-50 balance or even 60-40 with construction being lower,” he says.

Tan says the group began moving into these new areas a year and a half ago.

“We were just a building contractor back then before we saw opportunities in other areas. And it’s worked for us, it shows in the turnovers, profits and margins,” he says.

Binastra secured RM171.7mil of EPCC contracts for the development of large-scale solar 5 or LSS5 power plants last year.

It also secured EPCC contracts for sewage treatment plants in Mont Kiara and Cheras.

Then, there was a significant RM305mil contract from Bahru Stainless Sdn Bhd (BSSB), a steel producer for work related to a 65MWp solar photovoltaic (PV) system, and a 200MWh battery storage system to be installed at BSSB’s plant in Tanjung Langsat, Johor.

The project is under the Solar Energy Self-Consumption or SelCo programme and Binastra said the contract will support its earnings over the next two years.

Binastra’s move to build DC’s are also notable.

Its latest win includes a DC contract from Exsim valued at RM491mil.

This comes after already building four DC’s already within the Klang Valley.

Three of those four were also built for Exsim, which runs its own hyperscale DC hub in Bukit Jalil.

Notably, Exsim is a major customer of Binastra with a relationship spanning some 13 years, points out RHB Research.

It estimates that between 2004 and 2024, Binastra secured approximately RM5.6bil of contracts from Exsim.

Tan says venturing into DCs was a carefully thought out plan for the group’s future.

“Coming from a construction background, we have the experience and expertise to build DC’s. I’m asked what’s good about this segment, my short answer is the time period. It’s fast – you can complete a building in 10 to 12 months,” he reckons.

Tan expects that segment to be the key growth factor for the group’s financial year 2027’s (FY27) earnings. He is confident in securing three more DC contracts this year.

“We are already working very closely with our clients, and in the process of negotiating. One of our advantages is also that we are building DCs on a smaller scale – our target market is still between 15MW to 20MW,” Tan explains.

Despite so much of information and coverage on DCs themselves, Tan reckons that there are not many DCs in the country which have been built. Many are still being built or just at the stage of contract awards.

“Yes, there are a few being negotiated. But I don’t think there are that many ready to be leased out,” he says.

However, Binastra will not focus less on its construction work. Tan says there are still many ongoing projects they will need to complete.

The group has residential projects in the Klang Valley, Johor Baru (JB) and Kota Kinabalu.

According to Tan, there are three mega projects in Johor Baru alone, including Causewayz Square @ JBCC which consists of more than 4,000 units.

Tan says the projects in Kebun Teh and Taman Pelangi are also ongoing in phases.

“In total, these three projects have around 11,000 units, so we also set up a branch in JB.

“If there are opportunities for us to go into DC’s in JB, we will,” Tan says.

The group’s current order book is at RM6.8bil and will be enough to keep it busy for the next three years, notes Tan.

He says he is hopeful that in FY27 and FY28, the group will be able to maintain profit margins and see higher top line and bottom line.

Net profit margins for the residential side are about 10% while DCs are between 6% to 8%. Green energy projects are also similar to DCs.

“I’m confident we will see better earnings moving forward. Dividend wise, I’m also hoping there will be improvements from last year, this is one of the main things to us, giving our shareholders a good return.”

There are eight research firms that cover the stock – all of which have “buy” calls on Binastra.

AmInvestment Bank Bhd said it values Binastra at 14 times forward earnings.

“The premium is justified by the strong three-year earnings compound annual growth rate (CAGR) of 23%, supported by sustained contract replenishment and a sizeable RM6.8bil outstanding orderbook,” it said.

RHB Investment Bank Bhd said FY27 will be a year for Binastra to execute all its current jobs, as prospects continue to trickle in from new clients and RE-related projects such as solar PV projects.

“While its involvement in DCs is relatively smaller vs other listed contractors – we envisage that the company’s appetite to venture beyond its bread and butter residential property projects could pave way for other types of projects (not limited to DCs) – already evident through awards related to sewage treatment plants and solar projects,” the research firm said.

Phillip Capital noted: “We continue to like Binastra for its strong competitive advantage as a preferred contractor with key clients and superior profit margins.”

The key question for Binastra now is whether its diversification can translate into a more resilient and sustainable earnings profile.

As competition intensifies across the different segments Binastra is in, execution will be crucial.

For shareholders, the success of this strategy will ultimately be measured not only by higher revenue and profits, but also by whether it can deliver the improved dividends Tan is targeting.