Author: PublicInvest | Publish date: Tue, 14 Jun 2016, 09:05 AM
We met with management recently to get updates on current progress of its key jobs especially the Pan Borneo Highway and Kuching Centralised Wastewater System, its tender book and property launches. After securing two major projects worth c.RM1.8b recently, its outstanding orderbook has now ballooned to c.RM2.4bn. Going forward, HSL will be more selective on tendering for new jobs with key focus being on infrastructure and reclamation works that command higher margins. Also, we understand that it might bid for more sub-station jobs with its current partner, Larsen & Toubro Limited from India. Construction earnings are expected to be intact with the recent job replenishments. As such, we maintain ourOutperform call and TP of RM2.25, pegged at 12x FY17F EPS. Balance sheet is strong with net cash of RM132m or c.24 sen per share.
Outstanding order book of RM2.4bn. The successive job wins in 1QFY16 saw the Group’s outstanding orderbook quadruple to RM2.4bn from RM600m a quarter ago, incidentally also the Group’s highest order book ever. To recap, the biggest job win is the Pan Borneo Highway package which has a contract sum of RM1.7bn with contract period until late-2020. HSL has 70% stake with the remainder owned by a private company, Dhaya Maju Infrastructure (Asia) Sdn Bhd. The package involves sections on low-lying land, hence will leverage on the Group’s expertise in marine engineering. Margins are believed to be higher as compared to other packages on account of this. The other main job win is the Kuching Centralised Wastewater System that has a value of RM750m via its consortium of Kumpulan Nishimatsu Hock Seng Lee in which it holds a 75% stake. This job is expected to be completed by 2022. As for billings, we understand that only 10% of the Pan Borneo Highway contract will be recognized in FY16 while the Kuching Centralised Wastewater System is expected to be c.5% completed. With the currently healthy outstanding order book, we believe earnings visibility for its construction business will be good in the next 3-4 years. As for tender book, we understand that HSL is eyeing few sub-station jobs with its current partner Larsen & Toubro and, could also bid for other Pan Borneo subcontract packages.
Property. With phase 1 of La Promenade sold out, HSL is looking to unveil Phase 2 by end-2016. La Promenade is the Group’s gated and guarded development, located c.7km from the Kuching city center. Developable land size is c.200 acres with GDV in excess of RM1bn. We understand the GDV for phase 2 is c.RM100m and would be sold on ‘build-then-sell’ basis. Hence, this could boost Q1FY17 earnings if the sales are better than expected as most of the earnings can be recognized upon signing of sales and purchase agreement
Source: PublicInvest Research - 14 Jun 2016
Outstanding order book of RM2.4bn. The successive job wins in 1QFY16 saw the Group’s outstanding orderbook quadruple to RM2.4bn from RM600m a quarter ago, incidentally also the Group’s highest order book ever. To recap, the biggest job win is the Pan Borneo Highway package which has a contract sum of RM1.7bn with contract period until late-2020. HSL has 70% stake with the remainder owned by a private company, Dhaya Maju Infrastructure (Asia) Sdn Bhd. The package involves sections on low-lying land, hence will leverage on the Group’s expertise in marine engineering. Margins are believed to be higher as compared to other packages on account of this. The other main job win is the Kuching Centralised Wastewater System that has a value of RM750m via its consortium of Kumpulan Nishimatsu Hock Seng Lee in which it holds a 75% stake. This job is expected to be completed by 2022. As for billings, we understand that only 10% of the Pan Borneo Highway contract will be recognized in FY16 while the Kuching Centralised Wastewater System is expected to be c.5% completed. With the currently healthy outstanding order book, we believe earnings visibility for its construction business will be good in the next 3-4 years. As for tender book, we understand that HSL is eyeing few sub-station jobs with its current partner Larsen & Toubro and, could also bid for other Pan Borneo subcontract packages.
Property. With phase 1 of La Promenade sold out, HSL is looking to unveil Phase 2 by end-2016. La Promenade is the Group’s gated and guarded development, located c.7km from the Kuching city center. Developable land size is c.200 acres with GDV in excess of RM1bn. We understand the GDV for phase 2 is c.RM100m and would be sold on ‘build-then-sell’ basis. Hence, this could boost Q1FY17 earnings if the sales are better than expected as most of the earnings can be recognized upon signing of sales and purchase agreement
Source: PublicInvest Research - 14 Jun 2016
没有评论:
发表评论