This article first appeared in The Edge Financial Daily, on March 18, 2016.
Hock Seng Lee Bhd (-ve)
Shares of Sarawak-based marine engineering and infrastructure specialist Hock Seng Lee (HSL) (fundamental: 2.4/3; valuation: 1.2/3) rose as much as 6.5% to an intraday high of RM2.13 yesterday, following its announcement that it had bagged a new contract. The stock closed up 1.5% at RM2.03.
The wastewater management system contract for Kuching city centre, valued at RM750 million, was awarded to the consortium of Kumpulan Nishimatsu Hock Seng Lee, of which HSL has a 75% stake.
The scope of works includes construction and commissioning of the wastewater treatment plant, main, secondary and tertiary lines, property connections, provision of process plant and equipment, related building works, and mechanical and electrical works.
The contract period for the completion and commissioning of the wastewater treatment plant and the sewer networks is 72 months.
HSL’s revenue for the fourth quarter ended Dec 31, 2015 (4QFY15) fell 17% year-on-year (y-o-y) to RM160.2 million, due mainly to lower progress claim of construction works due to the completion of certain major projects while new projects were still in start-up phase.
However, net profit grew 7.5% y-o-y to RM21.7 million, compared to RM20.2 million in 4QFY14, thanks to the recovery of some profit margins in the construction segment and higher contributions from the property development segment.
Going forward, the company will continue to focus on its core business in infrastructure related projects. Opportunities include the upgrading of infrastructure and utilities for Sarawak’s rural communities, proposed upgrading of the Pan-Borneo Highway, and the Sarawak Corridor of Renewable Energy initiative.
It also expects better performance from the property development segment in 2016, as earnings from sales across all products late in 2015 will be recognised. In addition, HSL will launch a second residential phase — Precinct Luxe — at its 200-acre La Promenade mixed development in Kuching.
