Salcon is an under-researched and in our view still-undervalued small/mid-cap water and sewerage contractor. It exhibits the qualities of its bigger peers in their early years of M&A and is positioned strongly in two major sectors that drive the domestic construction space. Salcon’s rail-based fibre optic asset through 50.1%-owned VBT is a concession that is still in its infancy but offers prospects of dominating the captive rail transport segment. We initiate coverage with an Add rating and a target price of RM1.30, pegged to a 20% RNAV discount (52% upside). Potential catalysts are job wins and VBT's new contracts.