The largest local EPMS company. HSSEB (listed in Apr 2016) is principally involved in the provision of engineering and project management services (EPMS) to a wide array of projects including 1) railway & transit; 2) highway & transportation; 3) building & township; 4) port; 5) property; and 6) power & water. The Group has been involved in many notable large-scale projects including MRT 1 & 2, Maju Expressway 2, West Coast Expressway, SUKE Expressway, Pahang–Selangor Water Raw Transfer, Development of Sungai Selangor Phase 1, 2 and 3, Sarawak Water Grid Study and East Coast Rail Link. These are a testament to its EPMS capabilities and will position the group favourably to secure more projects in the government and private sector-led projects. The group is also planning to diversify its revenue into other high -growth sectors by exploring opportunities in the digital and technology industry, focusing on data centres as well as the 5G telco space.

Better days ahead Valuations are undemanding at 17.4x FY22E P/E (62% below 5Y mean of 46x) and 1.25x P/B (53% below 5Y mean 2.7x), supported by ~RM574m order book (sustainable for 2-3 years) and a strong 31% EPS CAGR from FY21-23. HSSEB is a potential beneficiary of an expected acceleration in infrastructure spending by end 2021 and 2022 post-Covid-19 recovery phase. Current order book stands at ~RM570m (rail: 50%; water: 25%; highway: 15% and infrastructure: 10%) and it remains bullish on expanding its order book with current tenders worth RM437m (engineering: 60%; project management: 37%; and building information modelling: 3%). Its key tendered projects include the MRT3, JB-SRT System, Sarawak Metro, Bayan Lepas LRT, Westports 2.0 expansion, PJD Link Expressway, Rasau Water Supply Scheme (WSS), etc.

Pending a rounding bottom formation. HSSEB offers positive news flow-driven trading opportunities ahead of Budget 2022. After correcting 29% from 52W high of RM0.68 (28 May) to RM0.48 (20 Aug) low, the stock rebounded to end at RM0.575 yesterday. HSSEB is poised for a bullish rounding bottom formation pending a successful breakout above RM0.58 neckline resistance. Clearing this hurdle will lift prices higher towards RM0.60-0.65-0.70 zones. Collection range is RM0.53-0.55- 0.575. Cut lost at RM0.52.

Source: Hong Leong Investment Bank Research - 14 Oct 2021