As one of the leading and by far the largest listed engineering consultancy group in Malaysia, we like HSSEB’s exposure to a wide array of domestic infrastructure segments, riding on the domestic pump-priming projects and the ASEAN as a major energizing force for growth. Unlike other construction companies, HSSEB is the only company that has no steel cost pressure. Given its impeccable track record in undertaking transportation and water projects, HSSEB is optimistic on expanding its order book in 2021 with a current tender book of ~RM300m. Some of the infrastructure projects it is pursuing include the MRT3, Sarawak Metro, RTS, Penang Transport Master Plan for reclamation works, Westport Phase 2, Sungai Perak raw water transfer scheme (SPRWTS), upgrading of water resource and supply For Johor (Iskandar and PIPC), Langkawi Water Supply, Sarawak Water Grid Study, and etc. Valuation is undemanding at 1.31 P/B (23% below 2Y mean of 1.7x), supported by ~RM443m order book (sustainable for 2 years) and a strong 33% EPS CAGR from FY20-22.

Ripe for a bullish downtrend line breakout. After tumbling 29% from a 3M high of RM0.68 (30 Dec 20) to a low of RM0.48 (2 Feb), HSSEB has been trending above the support trendline (from RM0.38 low). With prices trading above all major SMAs and supported by mild hook-up in technical indicators, HSSEB is poised for a LT downtrend line breakout from RM0.895. A successful breakout above this hurdle near RM0.625 will spur share prices higher towards RM0.675 (30 Dec 20 high) and our LT target at RM0.74 (76.4% FR). Meanwhile, key supports are situated at RM0.57 (50% FR) and RM0.54 (100D SMA). Cut loss at RM0.535.

Source: Hong Leong Investment Bank Research - 29 March 2021