Hock Seng Lee Bhd (HSL) is a Sarawak-based marine engineering, civil engineering and construction company.
Its origins date back to the mid-1960s when the three eldest brothers of the Yii family established what was principally a sand dredging and landfill operation. The group has been listed on Bursa Malaysia since 1996.
HSL is today one of Sarawak’s larger players, with a focus on dredging, land reclamation and earthworks, road and bridge construction, flood mitigation and specialised tunnelling. The group also has a property arm.
HSL undertakes sewerage works and infrastructure and building works for ports, airports, industrial parks, townships, educational institutions and housing. Its current ongoing projects include the Kuching City Centralised Waste Water Management project (Package 1), various road works in Kuching, Sri Aman, Sarikei, Mukah, Samarahan and Tanjung Manis; building works in Samarahan, flood mitigation works in Sibu as well as land reclamation jobs. In Oct 2011, it secured a RM90.3 million rural water treatment plant project in Samalaju.
Datuk Paul Yu Chee Hoe, HSL’s managing director shares with The Edge Financial Daily his strategies and dreams for the company.
TEFD: What are the company’s strengths and advantages?
Yu: HSL has a niche market position in marine engineering, particularly mass land reclamation which is an essential precursor to most construction works in the low-lying swampy terrain of Sarawak’s long coastline. Reclamation, earthworks, piping, roads, bridges and the many other forms of construction requiring geo-technical or water-related engineering expertise are strongly in demand in Sarawak and yet local skills in these fields are rare.
For this reason, and in view of our technical expertise and track record, we foresee our growth story to be an ongoing one. HSL has delivered consistently strong financial results with impressive earnings growth in each of the last 10 years; superior pre-tax profit margins averaging 20% over the last five years and has a healthy balance sheet with zero gearing and net cash position of some RM130 million.
We have a strong track record of project delivery over the last thirty years. Our order book is sizable at RM1.7 billion, with RM1.1 billion outstanding. As a major player in Sarawak, we expect HSL to be a beneficiary of accelerated infrastructure development in the state, through programmes such as the 10th Malaysia Plan and the Sarawak Corridor of Renewable Energy (Score). We are well placed to ride the potential infrastructure spending boom with a large portfolio of marine and land-based heavy equipment including dredgers, barges, cranes and tunnel boring machines.
The company has also been well recognised for creating shareholder value, with awards from The Edge and KPMG, among others. (Editor’s note: In November 2011, HSL received the Forbes Award as one of the top 200 best performing small-medium companies in the Asia-Pacific region).
What have been the major achievements of the company in the past four years?
HSL’s total order book has doubled over the past three years and is currently approaching a record RM2 billion. This is a reflection of the dramatic pace of infrastructure progress in its home state of Sarawak under the 10th Malaysia Plan as well as the advent of Score.
HSL has also continued to build on its expertise in marine engineering by undertaking increasingly sophisticated engineering projects, notably its move into high-tech tunnel boring for the implementation of central sewerage systems.
We had a record year in 2010 for revenue and pre-tax profit, both of which chalked up a 30% growth over the previous year. In 2010, we achieved record revenue of RM488.3 million and pre-tax profit of RM98.4 million with profit after tax of RM73.4 million. We posted earnings per share of 13.4 sen, achieved return on equity of 23%, declared total cash dividends of 10% and undertook a share distribution exercise on the basis of one share for every 50 shares held.
From 2006 to 2010, HSL’s revenue has grown 83% from RM260.6 million to RM488.3 million while pre-tax profit has doubled from RM48.2 million to RM98.4 million. Our net assets have grown by nearly 80% from RM193.2 million to RM345 million.
What are the major challenges your company faced over the years and how did you overcome them? Is there anything else you would have done differently?
We have managed our challenges well through an experienced and stable management. A few years back the major challenge was the dramatic fluctuation in material prices especially for fuel, cement and steel. However, we effectively mitigated the impact to our group with efficient project execution experience, hedging and building in cost variation clauses to our contracts.
How is the company positioning itself within the industry?
HSL enjoys a niche market position in Sarawak due to its unique skill set in marine engineering, its experienced technical and managerial personnel and its comprehensive range of advanced dredging, marine, heavy-lift, tunnel boring and other specialised machinery. We have the capacity and capability to expand nationally and regionally, but presently are very well occupied due to the amount of work in our home state of Sarawak. Our strategy will be to continue to pursue projects such as centralised sewerage, reclamation, flood mitigation and infrastructure works.
What are your strategies to grow market share and your plans for the future?
We will continue to look for opportunities which draw on our core skills in marine and civil engineering and to advance our technological capabilities. Reclamation is an industry for the future as desirable coastal land becomes scarce and populations increase. This can be seen in Singapore, Japan and Hong Kong where land continues to be reclaimed from the sea. We believe we will retain our strong competitive advantage through our local knowledge, machinery portfolio, experienced people and niche in marine engineering. HSL has identified three main thrusts in the fast-paced development of Sarawak and these will impact positively on the group’s prospects.
The first is the emphasis on rural development, in particular bringing basic amenities such as water, power and roads to the more remote areas of the state.
The second is the actual on-the-ground implementation of Score projects by foreign investors, which are mostly high-energy consuming metal producers.
The third is the upgrading of public infrastructure to cope with the issues of rapid urbanisation. The latter gives rise to the need for flood mitigation, centralised sewerage treatment and flyovers — all projects which HSL are exposed to and continues to pursue more of. Indeed HSL has procured contracts during the year that have been generated by these three main thrusts and this trend looks set to continue.
What is your dream for your company? How would you like to see it in 10 years’ time?
In 10 years, we hope HSL would be a leading marine and infrastructure company that will continue to help create modern sustainable urban environments through projects such as roads, bridges, sewerage systems, flood mitigation and new townships. There are still many opportunities for development in Sarawak which has a land area 117 times the size of Singapore.
We will also continue to grow our property development division with innovative products for modern lifestyles. It currently contributes less than 10% to the group’s bottom line, but we expect this to grow to over 20% in the medium term.
Its origins date back to the mid-1960s when the three eldest brothers of the Yii family established what was principally a sand dredging and landfill operation. The group has been listed on Bursa Malaysia since 1996.
HSL is today one of Sarawak’s larger players, with a focus on dredging, land reclamation and earthworks, road and bridge construction, flood mitigation and specialised tunnelling. The group also has a property arm.
HSL undertakes sewerage works and infrastructure and building works for ports, airports, industrial parks, townships, educational institutions and housing. Its current ongoing projects include the Kuching City Centralised Waste Water Management project (Package 1), various road works in Kuching, Sri Aman, Sarikei, Mukah, Samarahan and Tanjung Manis; building works in Samarahan, flood mitigation works in Sibu as well as land reclamation jobs. In Oct 2011, it secured a RM90.3 million rural water treatment plant project in Samalaju.
Datuk Paul Yu Chee Hoe, HSL’s managing director shares with The Edge Financial Daily his strategies and dreams for the company.
TEFD: What are the company’s strengths and advantages?
Yu: HSL has a niche market position in marine engineering, particularly mass land reclamation which is an essential precursor to most construction works in the low-lying swampy terrain of Sarawak’s long coastline. Reclamation, earthworks, piping, roads, bridges and the many other forms of construction requiring geo-technical or water-related engineering expertise are strongly in demand in Sarawak and yet local skills in these fields are rare.
For this reason, and in view of our technical expertise and track record, we foresee our growth story to be an ongoing one. HSL has delivered consistently strong financial results with impressive earnings growth in each of the last 10 years; superior pre-tax profit margins averaging 20% over the last five years and has a healthy balance sheet with zero gearing and net cash position of some RM130 million.
We have a strong track record of project delivery over the last thirty years. Our order book is sizable at RM1.7 billion, with RM1.1 billion outstanding. As a major player in Sarawak, we expect HSL to be a beneficiary of accelerated infrastructure development in the state, through programmes such as the 10th Malaysia Plan and the Sarawak Corridor of Renewable Energy (Score). We are well placed to ride the potential infrastructure spending boom with a large portfolio of marine and land-based heavy equipment including dredgers, barges, cranes and tunnel boring machines.
The company has also been well recognised for creating shareholder value, with awards from The Edge and KPMG, among others. (Editor’s note: In November 2011, HSL received the Forbes Award as one of the top 200 best performing small-medium companies in the Asia-Pacific region).
What have been the major achievements of the company in the past four years?
HSL’s total order book has doubled over the past three years and is currently approaching a record RM2 billion. This is a reflection of the dramatic pace of infrastructure progress in its home state of Sarawak under the 10th Malaysia Plan as well as the advent of Score.
HSL has also continued to build on its expertise in marine engineering by undertaking increasingly sophisticated engineering projects, notably its move into high-tech tunnel boring for the implementation of central sewerage systems.
We had a record year in 2010 for revenue and pre-tax profit, both of which chalked up a 30% growth over the previous year. In 2010, we achieved record revenue of RM488.3 million and pre-tax profit of RM98.4 million with profit after tax of RM73.4 million. We posted earnings per share of 13.4 sen, achieved return on equity of 23%, declared total cash dividends of 10% and undertook a share distribution exercise on the basis of one share for every 50 shares held.
Construction is one of HSL's business operations.
From 2006 to 2010, HSL’s revenue has grown 83% from RM260.6 million to RM488.3 million while pre-tax profit has doubled from RM48.2 million to RM98.4 million. Our net assets have grown by nearly 80% from RM193.2 million to RM345 million.
What are the major challenges your company faced over the years and how did you overcome them? Is there anything else you would have done differently?
We have managed our challenges well through an experienced and stable management. A few years back the major challenge was the dramatic fluctuation in material prices especially for fuel, cement and steel. However, we effectively mitigated the impact to our group with efficient project execution experience, hedging and building in cost variation clauses to our contracts.
How is the company positioning itself within the industry?
HSL enjoys a niche market position in Sarawak due to its unique skill set in marine engineering, its experienced technical and managerial personnel and its comprehensive range of advanced dredging, marine, heavy-lift, tunnel boring and other specialised machinery. We have the capacity and capability to expand nationally and regionally, but presently are very well occupied due to the amount of work in our home state of Sarawak. Our strategy will be to continue to pursue projects such as centralised sewerage, reclamation, flood mitigation and infrastructure works.
Yu says reclamation is an industry for the future as desirable land becomes scarce and populations increase.
What are your strategies to grow market share and your plans for the future?
We will continue to look for opportunities which draw on our core skills in marine and civil engineering and to advance our technological capabilities. Reclamation is an industry for the future as desirable coastal land becomes scarce and populations increase. This can be seen in Singapore, Japan and Hong Kong where land continues to be reclaimed from the sea. We believe we will retain our strong competitive advantage through our local knowledge, machinery portfolio, experienced people and niche in marine engineering. HSL has identified three main thrusts in the fast-paced development of Sarawak and these will impact positively on the group’s prospects.
The first is the emphasis on rural development, in particular bringing basic amenities such as water, power and roads to the more remote areas of the state.
The second is the actual on-the-ground implementation of Score projects by foreign investors, which are mostly high-energy consuming metal producers.
The third is the upgrading of public infrastructure to cope with the issues of rapid urbanisation. The latter gives rise to the need for flood mitigation, centralised sewerage treatment and flyovers — all projects which HSL are exposed to and continues to pursue more of. Indeed HSL has procured contracts during the year that have been generated by these three main thrusts and this trend looks set to continue.
What is your dream for your company? How would you like to see it in 10 years’ time?
In 10 years, we hope HSL would be a leading marine and infrastructure company that will continue to help create modern sustainable urban environments through projects such as roads, bridges, sewerage systems, flood mitigation and new townships. There are still many opportunities for development in Sarawak which has a land area 117 times the size of Singapore.
We will also continue to grow our property development division with innovative products for modern lifestyles. It currently contributes less than 10% to the group’s bottom line, but we expect this to grow to over 20% in the medium term.
