Hot Stock HSL rises 7.7% after gains in Sarawak counters, expectation of contract win

by **Cals** Wed 23 Apr 2014, 22:29

Hot Stock HSL rises 7.7% after gains in Sarawak counters, expectation of contract win

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Wednesday, 23 April 2014 12:23

KUALA LUMPUR (Apr 23): Hong Seng Lee Bhd rose as much as 7.7% following gains made in other Sarawak-related stocks, analysts said. Expectation that the company may win a major contract soon also boosted the stock.

At 12.08 pm today, HSL gained 13 sen or 7.1% to RM1.95. The second top gainer saw trades of some 2 million shares. It had earlier hit a high of RM1.96.

An analyst told theedgemalaysia.com that HSL is playing ‘catch-up’ with other Sarawak-based stocks.

“The stock is following in suit of other Sarawak-related stocks that have made gains recently, such as Naim Holdings Bhd,” said the analyst who is familiar with the marine & civil engineering and construction firm.

“We believe the stock will be spurred further if HSL can secure more contracts. The stock is a 'buy' with a fair value of RM2.06,” the analyst added over the telephone.

Meanwhile, Kenanga Research said HSL is an ‘outperform’ with target price of RM2.31, after initiating coverage in its research report today.

Its analyst Iqbal Zainal said, HSL is likely to win phase 2 of the RM452 million Kuching Centralised Wastewater System (KCWS), with the outcome expected to be announced in the second quarter this year.

“It is highly likely that HSL will win the project due to its expertise, resources, capacity, and track record,” said Iqbal, noting HSL is currently testing and commissioning the KSWC.

“Management has guided that the project is worth between RM500 million to RM1 billion,” he said.

He noted HSL has ‘significant’ presence in the Sarawak Corridor of Renewable Energy (SCORE) areas with 30% of its total order book (RM1.1 billion) within the SCORE region.

“Being a major contractor in Sarawak, HSL is everywhere in the state, thanks to its flexibility and resources,” said Iqbal.

Furthermore, Iqbal highlighted, HSL has strong financials, where it has the highest margins in the construction space and strong cash pile of 32 sen per share with no borrowings.