HSS Engineers eyes big league       [FOCUS MALAYSIA 18/MARCH/2017]
Possible move to main market, expansion to India, Asean, and Middle East

“Now, as opposed to milestone payments, we ask clients for monthly instalments.  It’s not a common practice in the industry, but we have been working with our clients for so long and they understand.”

AFTER its strong debut on the ACE Market of Bursa Malaysia Securities in August, HSS Engineers Bhd could be heading for the main market following an impressive net profit of RM7.13 mil for its fourth quarter ended Dec 31.It posted revenue of RM138.98 mil for the last financial year ended Dec 31, up 14% from FY15’s RM121.50 mil.Net profit was RM13.86 mil, a 36.8% jump from RM10.13 mil.Its share price has been rising too, touching 57 sen on March 14, after falling to a low of 40 sen in January.Moving to the main market is possible, says founder and executive director Datuk Seri Kunasingam Sittampalam, but nothing is concrete.More than 30 years after starting the company, the 63-year-old businessman has learned that slow and steady is the best approach.The company has laid out plans to expand to India, the Asean region and the Middle East.It will first focus on markets closer to home, leveraging the presence of its clients in neighbouring countries when the time is right.“We are looking at Indonesia where we have done very little work. These are growing economies, so there will be many jobs.“We are looking at getting projects there and do planning here, or we could look at acquiring a stake in a business. We want to be cautious and prudent,” Kunasingam tells FocusM.HSS Engineers has an office in India where transportation infrastructure is developing rapidly. It has also completed projects in the UAE which will serve as a platform for future bids, including infrastructure projects for the 2022 World Cup in Qatar.Currently, 97.5% of its revenue is generated locally.In FY15, 75% of its income was from infrastructure projects, of which 57% was from railway and transit systems. Power segment and water infrastructure is the smallest segment with 1%, but Kunasingam believes it has potential to grow.

Far from smooth sailing

It has not always been smooth sailing for HSS Engineers. In 2010, its subsidiary HSS Integrated Sdn Bhd signed a memorandum of agreement with Malaysia Airports Holdings Bhd (MAHB) for site preparation, earthworks and drainage works at klia2.In December, it received a notice of arbitration, claiming RM64.62 mil for an alleged breach of terms of the agreement.HSS Engineers, in an exchange filling, said MAHB has failed to produce relevant documents as of the announcement date. However, Kunasingam says such situation are normal in the construction industry.“MAHB is going for mediation, and we hope to resolve that soon. These things are normal in the industry. We are transparent about that as we are a publicly-listed company. The board is of the opinion that it will not have any impact on our bottom line,” he says.
HSS Engineers had relatively humble beginnings. Kunasingam and his partner, the late Datuk Santhakumar Sivasubramaniam, set up HSS Consults in 1984.“We were young and enthusiastics, having just returned from our studies overseas. We felt we could take engineering to another level and improve the area of consulting. "We wanted to start even before that, but getting projects was very hard because we were young and no one took us seriously. We even considered dying our hair white look older!“We had our first big break in 1984 (with a job) at Taman Cuepacs in Cheras.With that we started HSS Consults. In 1988 it evolved into HSS Integrated when the North-South Highway project began.There were changes in ownership but the main shareholders were the same.“Financing was a big issue. We needed working capital, not just loans for projects. The government helps businesses today, but then it was you and your friends (to provide funding).
“Banks did not lend for project funding, but only to people. The only other body was Credit Guarantee Corporation. After a year in the business, we got bank funding for only RM50,000, which we used for working capital and hiring staff. By 1985 we were handling several projects,” says Kunasingam, who holds a degree and masters in engineering from Sheffield University, UK.

Bitter pill

In 1986, HSS Consults landed another big project to design a road cutting through hilly terrain from Kerling, Selangor to Fraser Hill’s, Pahang.However, recession hit a year later, and the government shelved the project.It was a bitter pill for the company to swallow, he says.Kunasingam says tough times are part of running a business. The company was badly affected by the 1997-1998 financial crisis. “In our business, we get paid only after a job is completed. We had major clients who owed us money.
As the dragged payments, we didn’t have enough money to pay our staff.“What I appreciate is that we stayed together. Everyone in the company voluntarily took pay cuts because we did not want to let anyone go. I give credit to our staff for that. It took us three years to get back on track.”Through it all, Kunasingam has learned a valuable lesson. “Never take for granted what you have. We never expected the 1990s crisis to happen, but it did and we were hurt badly. We learned a useful lesson. Cash is king and we learned to be prudent. Now, as opposed to milestone payments, we ask clients for monthly installments. It’s not a common practice in the industry, but we have been working with our clients for so long and they understand.”
He has also learned to work only on projects where HSS Engineers’ strengths can be put to best use. “We do not take on any job. For certain housing projects, for example, other consultants are most cost effective for clients. Our strength is in large-scale infrastructure. Bear in mind,however, that in the 80s, RM50 mil was a huge project. Now RM20 bil is the norm.”

Innovation is vital

Kunasingam says innovation is important in the industry. “We emphasise constant learning and methods are constantly evolving. We had open office concept in the 80s before it was trendy. We started with just two of us, now we have 600 staff. My office door is always open and anyone can walk in to talk.”The company’s headquarters in Cheras has a lecture theatre for senior staff members to holds classes and visiting engineers to given talks and share ideas.To unwind, Kunasingam enjoys golf although lately he had not much time to play. He goes for a walk in the mornings to keep fit, if time permits.An avid cricketer in his student days at the Royal Military College, he believes the lessons he learned playing team sports are applicable in business.“My children are also good at sports and I encourage that. None has gone into engineering and won’t be joining the business.”

注:HSSEB手中的訂單,加上刚拿到5.4m合約,目前共有383,9m訂單,这些訂單至少可以忙碌2-3年.

目前股票組合成功率保持在100%,整体回酬表現卓越,尤其是几个主力股,如KUB,紙上盈利108%,(时间10个月),RCECAP紙上盈利85%(时间7个月半),这还不包括已收到的股息,至于2月份少量买入的股如HSSEB,(平均买入价0.54),FAJAR(平均买入价0.56)及FAJAR-WB(平均买入价0.165),回酬也很出色.希望接下來还能保持卓越的回酬.