Journey to Wealth
Hock Seng Lee - Keeping up the momentum BUY
- We maintain BUY on Hock Seng Lee Bhd (HSL), with a downward revised sum-of-parts fair value of RM2.48/share (vs. RM2.59/share previously), which includes a PE of 8x against its 3-year average forward earnings for its construction division. The valuation is supported by net cash of 44 sen/share (FY13F) and RNAV for its 890 acre-landbank at 65 sen/share.
- HSL posted a net profit of RM25.9mil (+14% QoQ, -0.9% YoY) for 4QFY12 - bringing its full-year earnings to RM90.7mil (+3.9% YoY). This was within expectations, vis-à-vis our estimate of RM90.9mil and consensus' RM90.6mil.
- It declared final and and special gross dividends of 2 sen/share and 0.6 sen/share, respectively. It had earlier declared the first interim gross dividend of 1.4 sen/share. The total payout of 4 sen/share (+11% YoY) fell short of our estimate of 4.4 sen/share.
- We have adjusted downwards our FY13F-FY14F GDPS forecast to 4.6 sen and 5.2 sen, from the earlier 5 sen and 5.6 sen, respectively. We have also tweaked our FY13F-FY14F earnings downwards by 15% and10% on the back of a 17% and 14% cut in revenue, respectively, stemming from the latest composition of its order book. We estimate HSL currently has some RM1.8bil worth of external jobs in hand, with about ~RM1.04bil still outstanding.
- We introduce an FY15F net profit at a conservative RM122mil, or a growth of 5%, pending confirmation of more jobs being secured. We maintain our assumption of RM600mil new jobs annually for the next three years. For FY12, it had secured some RM525mil worth of new projects (vs. RM313mil in 2011), completing some RM414mil worth of jobs.
- For FY12, construction operating margins remained stable at 19%-20%, compared to FY11's levels. We are maintaining those margins for the subsequent years.
- Its largest on-hand project is still the Kuching City Centralised Wastewater Management project (Package 1), with work on the last mile lasting until 2014. Looking ahead, it will be bidding for the remaining phases of the project.
- We continue to like HSL for its:- 1) strong earnings visibility over FY12F-FY14F, 2) strong balance sheet, including the RM200mil cash in hand as at 31 December 2012, and 3) as a proxy to the strong growth in the state's construction sector given other potential jobs in the pipeline within and without SCORE.
- The stock continues to trade at an undemanding FY13FFY15F PEs of 7x-8x.
Source: AmeSecurities
Related Stocks
| Chart | Stock Name | Last | Change | Volume |
|---|
Market Buzz
More articles on Journey to Wealth
Ekovest: No plan to launch another offer for Iskandar Waterfront City
Created by kiasutrader | Mar 29, 2018
Kenanga Research - On our Portfolio - Parliament dissolution around the corner?
Created by kiasutrader | Mar 25, 2013
Plantation Sector - Proposed accounting standard scrapped OVERWEIGHT
Created by kiasutrader | Mar 25, 2013
Pavilion Reit - Limited upside, earnings upside have been priced in HOLD
Created by kiasutrader | Mar 25, 2013
Discussions
Be the first to like this. Showing 0 of 0 comments
Post a Comment
Featured Posts
Latest Videos
Apps
Top Articles
1
2
THE INVESTMENT APPROACH OF CALVIN TAN
3
4
save malaysia!
5
Koon Yew Yin's Blog
7
8
CEO Morning Brief
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
