INVESTMENT HIGHLIGHTS

• Bagged RM299.3m worth of jobs from JKR Sarawak

• The job scope covers the construction of a 1.9km long reinforced concrete structure balanced cantilever bridge

• The job will likely contribute RM3.7m-RM4.5m to earnings

• We maintain NEUTRAL with an unchanged TP of RM1.54

Bagged RM299.3m worth of jobs from JKR Sarawak. Hock Seng Lee has received letter of acceptance from JKR Sarawak for a project under the proposed construction and completion of the Sarawak Coastal Road, Package 3. The project is for the proposed Batang Paloh Bridge, which will add RM299m worth of value to HSL’s outstanding orderbook.

The job scope covers the construction of a 1.9km long reinforced concrete structure balanced cantilever bridge, which will include substantial marine pilling works using 1500mm diameter steel pipe pile. The other scope includes earthworks, geotechnical, drainage, pavement works and the associated mechanical and electrical works. The progress is set to run in the next 48 months (until April 2023) from May 2019.

Planned bridge construction backed by RM11b granted to JKR. The Batang Paloh Bridge is one of the bridges planned for construction in Sarawak. In a broader sense, there are nine new bridges proposed for construction which include Batang Rajang, Batang Saribas, and Batang Lupar to name a few. We understand that its execution is made possible by the state funds granted to JKR, amounting to RM11b. We view these developments as positive for Sarawak, which will spur the state’s construction industry further. Accordingly, local contractors like HSL will stand to benefit.

Job wins this year. The package marked another win for HSL this year, with new CY19 orderbook at RM353.3m. This amount commands approximately 71% share of our job replenishment assumptions.

Earnings impact from the contracts. The job will likely contribute RM3.7m-RM4.5m to earnings, annualized based on our straight line estimates. This was arrived after imputing 5%-6% net margin of the total project value. The figures fall within our range of assumptions, hence no changes were made to our earnings forecasts. Altogether, we note that HSL’s current unbilled orderbook stands at about RM2.5b.

Source: MIDF Research - 18 Apr 2019