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Author: PublicInvest   |   Latest post: Fri, 22 Feb 2019, 10:08 AM

 

Hock Seng Lee Berhad - Another Contract From Sarawak Energy

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Hock Seng Lee (HSL) reported that it has secured a contract from Sarawak Energy Bhd for a project in Mukah known as the 2x312MW Balingian Coal Fired Power Plant Project. It comprises two packages - Package C05A and Package C05C with a combined value of RM54.3m. With this first contract of the year, we estimate the Group’s balance orderbook in hand remaining healthy at RM2.4bn, translating to c. 4.1x of estimated FY18 construction revenue. While positive on the contract win, we are leaving our forecasts unchanged as this makes up part of our FY19 order book replenishment assumptions. The Group will be announcing its 4QFY18 results on February 26. We anticipate numbers to be in line with our estimates, with RM15m net profit to be recorded during the quarter. Our Neutral call with an unchanged TP of RM1.21 at this juncture, pegged at c.9x PER to our FY19 EPS of 13.4sen. The PER applied is justifiable given the not-too-sanguine local construction sector outlook.

  • The contract worth RM54.3m was awarded by Sarawak Energy Bhd. It comprises two packages namely Package C05A – Earth Works and Common Facilities, and Package C05C – Operator’s Residence for 2X312MW Balingian Coal-Fired Power Plant Project in Mukah, Sarawak. The scope of works includes pilling, earth works, infrastructure works, building works for staff accommodation and related amenities as well as the associated mechanical and electrical works.
  • Healthy outstanding orderbook. This marks the first contract of the year. We estimate the Group’s balance orderbook in hand remains healthy at RM2.4bn, translating to c. 4.1x of estimated FY18 construction revenue.
  • Earnings forecast. With commencement of works starting this month and to extend over an 18-month period, this project is expected to contribute positively to the Group’s FY19-20 numbers. Assuming a profit margin of 11%, we estimate this project will contribute c. RM6m profit at gross level. We make no adjustment to our earnings estimates however as this makes up part of our FY19 order book replenishment assumptions.
  • Results preview. The Group will be announcing its 4QFY18 results on February 26. We anticipate the numbers to be in line with our estimates with around RM15m net profit to be recorded during the quarter, on the back of about RM193m revenue to be derived from its on-going projects such as Pan-Borneo Highway and Package 2 of Kuching’s Centralized Wastewater Management System.

Source: PublicInvest Research - 12 Feb 2019

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