Friday 29 Mar 2024
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KUALA LUMPUR (Nov 13): RHB Investment Bank Bhd raised its earnings forecast for builder Hock Seng Lee Bhd (HSL) by 10.3%, 1.8% and 8.9% for financial year ending Dec 31, 2019 (FY19), FY20 and FY21 respectively on higher orderbook win assumptions.

RHB analyst Alexander Chia wrote in a note today RHB also took into account HSL's property earnings.

"We roll forward our base year to FY20 and cut our net cash assumption to be in line with its 2QFY19 numbers. Meanwhile, we maintain a 12x target P/E to construction earnings and 30% discount to RNAV (revised net asset value) for its property division.

"As such, our (HSL share) target price drops to RM1.62 (from RM1.79). Key downside risks include failure to secure new contracts, and a prolonged downturn in the retail and property markets," Chia said.

At Bursa Malaysia today, HSL shares were traded unchanged at RM1.31 at 9:48am.

Chia said RHB, however, maintained its "buy" rating on HSL shares due to optimism on the group's business.

"We remain optimistic on HSL and construction activities in Sarawak after a recent discussion with management. We expect 2HFY19 earnings to be seasonally stronger than 1HFY19. HSL is one of the key beneficiaries of Sarawak's economic development," he said.

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