Investment Highlights

• We maintain our forecast, BUY call and FV of Hock Seng Lee (HSL) of RM1.76 based on 14x FY18F EPS, which is in line with our 1-year forward target PE of 13-15x for midcap construction stocks.

• This follows the award by X-FAB Sarawak Sdn Bhd of RM56.5mil piling, building works (new construction and renovation and refurbishment of existing building), and the associated mechanical and electrical works, to be completed within the next 19 months. We are positive on the latest development.

• Including the latest contract, HSL’s YTD job wins now add up RM630mil (which is consistent with our FY17F-19F order book replenishment assumption of RM600mil annually), while its outstanding order book stands at RM2.7bil.

• We continue to like HSL for the following reasons: 1) Its sizeable outstanding order book of RM2.7bil that will keep it busy over the next 3-4 years; 2) Its strong prospects for new job wins from massive infrastructure developments such as roads (anchored by the RM16bil Pan Borneo Sarawak Highway and the RM12.8bil Pan Borneo Sabah Highway), ports, hydro power plants and water/wastewater treatment facilities; and (3) its core strength in marine works and land reclamation.

Source: AmInvest Research - 22 Nov 2017