News

Secured RM53.6m infrastructure works project for Demak Laut Industrial Park in Kuching from the Ministry of Industrial Development through an open tender exercise.

The scope of works includes site clearing, earthworks, drainage, road works and other related works. The project is expected to be completed by 3QCY15 (24 months).

Highlights

Decent win… The latest award is HSL’s 4th major contract win for FY13. Just last year in Jun-12, HSL has also secured a similar project for Demak Laut Industrial Park for RM26m.

The size of the project is decent, making up 9.3% of FY12’s construction revenue and 4.5% of its previous outstanding order book of ~RM1.2bn.

Total of RM435m secured… YTD, HSL has secured RM434.6m worth of contracts, making up 87% of our RM500m order book replenishment assumption for FY13.

Earnings visibility… HSL has an outstanding order book of RM1.25bn, which translates to ~2.2x FY12’s construction revenue and ~1.2x order book-to-market cap ratio.

Risks

Execution risk; Regulatory and political risk; Rising raw material prices; and Unexpected downturn in the construction sector.

Forecasts

Unchanged as the contract win is already part of our RM500m order book replenishment assumption for FY13.

Rating

BUY

Positives: (1) New contract wins; (2) Growing property development contribution; (3) Securing recurring income-related projects.

Negatives: (1) Failure in securing sizable contracts to replenish order book.

Valuation

Maintain Target Price of RM2.17 based on unchanged 12x average FY13-14 earnings.

Source: Hong Leong Investment Bank Research - 2 Oct 2013