- We reiterate BUY on Hock Seng Lee (HSL), with an unchanged
sum-of-parts value of RM2.76/share, which includes a PE of 9x the average of
3-year forward earnings of the construction division and landbank RNAV of 65
sen/share.
- HSL today announced an additional three contracts worth a total
of RM73mil, bringing the total new orders so far this year to RM155mil. It had
earlier this year secured an RM82mil contract for the development of a
20.2km-road stretching from Balingian to Jalan Persekutan, Sibu/Bintulu.
- The 3 new projects are:- 1) an additional RM45.7mil worth
of flood mitigation jobs in Sibu (under phase 2 after completion of the first
phase); 2) earthworks and construction works for a RM10.6mil orphanage complex
in Bintulu; and 3) earthworks and construction works for a RM16.9mil government
science facility, also in Bintulu.
- The new contracts bring the total value of projects in
hand to RM1.7bil, of which about RM1.0bil is outstanding.
- State Industrial Development Minister Datuk Amar Awang Tengah
Ali Hassan was recently quoted as saying that the Sarawak Corridor of Renewable
Energy (SCORE) has attracted 17 projects, worth a total investment of
RM23.6bil. He said the development corridor has been progressing well,
particularly in three growth nodes in the Samalaju Industrial Park, Mukah Smart
City and Tanjung Manis Halal Hub.
- Amid the construction boom in Sarawak, home-grown HSL is poised
to secure more jobs given its unique engineering and reclamation expertise,
particularly in construction jobs on peat soil which covers a vast expanse of
the state.
- The current outstanding order book of RM1bil will provide
the group with clear earnings visibility at least for the next two years, apart
from property development projects on
its 890 acre-landbank that could last through the next decade. We maintain
our order book assumption of RM600mil p.a. for FY12F-FY14F.
- Potential jobs in the pipeline are:- 1) The remaining
RM1.7bil packages of the Kuching central sewerage system; 2) the construction
of the Samalaju port; 3) participation in the construction of power-related
plants and ancillary jobs; and various roads, water, flood mitigation and other
infrastructure projects.
- As it stands, HSL has been deeply involved in various
projects in the growth nodes, including Samalaju, Mukah and Tanjung Manis. The
stock is currently trading at an undemanding FY12FFY14F PEs of 6x-8x against a
robust EPS CAGR of 15%, and strong balance sheet.
Source: AmeSecurities
No comments:
Post a Comment