• HLIB has a BUY rating with an institutional TP of RM2.00 (18.3% upside). Following the announcement of a RM333m contract (its 1 st win for FY17) for the wastewater treatment plant and sewer networks in Miri, we estimate HSL’s orderbook now stood at RM2.4bn. Against FY16 construction revenue, this provides a strong degree of earnings visibility (FY16-18 earnings CAGR of 33%) and translates to a strong cover ratio of 5.6x. So far, physical constructions have been slow but we expect them to progress meaningfully in 2017. Valuation is undemanding at 9.8x FY18 P/E (16% below its 10-year average 11.7x), with healthy balance sheet of RM88.5m (RM0.16/ share) netcash.

• Uptrend remains intact. After correcting 26% from a high of RM2.14 (21 March 2016) to a low of RM1.58 (8 Dec 2016), share price has gradually recovered and formed a series of higher highs and higher lows to hit YTD high of RM1.75 (7 March) before ending lower at RM1.69 last Friday.

• Despite the mild pullback, near term uptrend remains intact as share prices are trending above the support trend line. A breakout above RM1.75, in our view, could form a new upswing towards RM1.86 (50% FR) and our LT objective at RM2.00 psychological barrier. On the flip side, key supports are RM1.61 (YTD low) and RM1.58 (52-week low). Cut loss at RM1.57

Source: Hong Leong Investment Bank Research - 20 Mar 2017