HSL shares fall despite RM81m project

HSL shares fall despite RM81m project
Business & Markets 2013
Written by Madiha Fuad of theedgemalaysia.com
Monday, 15 April 2013 10:27


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KUALA LUMPUR: Despite securing an RM81 million project in Samalaju Industrial Park in Bintulu, Sarawak, last Friday, HOCK SENG LEE BHD [] (HSL) fell 1.3% or two sen to RM1.52 at last week’s close.

The Bintulu Development Authority has awarded the Sarawak-based builder two contracts — a RM64.5 million road project and RM16.5 million drainage diversion job.

An analyst said the slide in HSL’s share price could be related to the general election, as the Opposition coalition is expected to make a political breakthrough in Sarawak.

Some investors are already divesting Sarawak-based stocks to avoid possible election risks.

“HSL is a good stock to invest in as the company is doing well. However, fund managers may want to adjust their shareholding in Sarawak companies.

“You can see that shares of most of these companies, such as NAIM HOLDINGS BHD [], CAHYA MATA SARAWAK BHD [] as well as others, are not doing so well lately,” he added.

Hong Leong IB Research gave a flattering report on HSL last week, and listed the company as one of its top picks in the CONSTRUCTION [] sector. It recommended a “buy” for the stock with a target price of RM2.09.

The latest contracts will add about 4% to HSL’s outstanding order book of RM1.1 billion as at September 2012.

“These contracts are expected to contribute positively to the earnings and net assets of HSL group for the financial years ending 2013 to 2015 [FY13 to FY15],” said the company in an announcement to Bursa Malaysia.

The drainage diversion job is due for completion in the first quarter of 2014, while the road project is expected to be completed in the second quarter of 2015.

The scope of work for the drainage diversion job within the Bintulu division of the Samalaju Industrial Park includes earthworks and slope protection measures.

The scope of the road project comprises site clearing, earthworks, drainage and slope protection.
Earlier this year, HSL secured an infrastructure project worth RM48.8 million in the Samalaju Industrial Park.

Together with this project and the two recently acquired contracts, the overall value of HSL’s involvement in the industrial park is about RM130 million.

The infrastructure project, said to include earthworks, drainage works, pavement and related external works, is due to be completed in the third quarter of 2014 and expected to contribute positively to its earnings for FY13 and FY14. This contract was HSL’s first major tender win for 2013, resulting in its share price jumping from RM1.50 to RM1.59.

According to Maybank IB Research, the RM48.8 million project is estimated to contribute about RM6.6 million net profit to HSL’s FY14.

“Last year, the group secured about RM525 million in new contracts. Its job win value for this year should at least match last year’s,” it said.

For the fourth quarter ended Dec 31, 2012, the group posted RM25.9 million in net profit on the back of RM160.1 million revenue. For the full year, the group recorded a 4% increase in net profit to RM90.7 million from the previous year’s RM87.3 million

HSL is involved in construction, marine and civil engineering, focusing on dredging, land reclamation and earthworks, road and bridge construction, as well as flood mitigation and specialised tunnelling.


This article first appeared in The Edge Financial Daily, on April 15, 2013.