- We maintain BUY on Hock Seng Lee Bhd (HSL), with an unchanged SOP fair value of RM2.30/share, following its 1HFY15 result.

- HSL posted a 2Q net profit of RM17.0mil (-13% QoQ, -10% YoY), bringing the 1H total to RM36.7mil – slightly below our expectations at 39% of our forecast and barely meeting consensus at 40%.

- The 1H result was impacted by lower margin jobs. The company declared an interim dividend of 1 sen/share vs. 1.2 sen/share a year earlier. The ex-date is set for 15 Sept 2015, entitlement on 18 Sept and payment on 8 Oct 2015.

- On average, the IH results constituted ~46% of full-year earnings over the past five years. We maintain our numbers for now.

- For 1H15, HSL secured 14 new projects of varying sizes worth ~RM216mil (1Q: RM105mil), including several in the SCORE (Sarawak Corridor of Renewable Energy) region.

- HSL continues to view infrastructure requirements for SCORE as still being urgent and substantial, and they are expected to continue to generate work flows for the group.

- Management hopes to maintain the momentum in 2H15 and expects to “pick up a few more new projects before the year-end.” As at end-June 2015, HSL’s outstanding order book stood at RM860mil, 1.4x its FY14 revenue.

- We maintain our construction new order assumption at RM600mil annually. For now, we also maintain our construction EBITDA margin assumption at 18%.

- HSL completed more than RM600mil worth of works YTD, including the first package of the Kuching centralised wastewater management system, infrastructure works inSamalaju and Balingian as well as flood mitigation works in Sibu.

- The state has yet to award the remaining phases of the Kuching centralised wastewater project, which could have a total contract value of another RM3.5bil.

- The risks include the failure to the timing the remaining phases of the Kuching central sewerage project and slowdown in construction jobs amid a depleting order book.

- The bulk of its outstanding order will be completed over FY15F-FY16F. Maintain BUY: HSL could be a strong beneficiary of jobs news flow leading up to the impending state elections.

Source: AmeSecurities Research - 27 Aug 2015