Hock Seng Lee Bhd (Feb 10, RM1.70)
Maintain buy with revised fair value of RM2.44 from RM2.30: We have tweaked downwards our earnings forecast for FY11F by 4%, but upped FY12F and FY13F earnings by 1% to 5% after raising our order book assumption to RM600 million (against RM570 million previously) each per year.
Our upward revisions are prompted by recent news flow that has strengthened our belief in the multi-year re-rating prospects for local construction players in Sarawak.
We believe there will be a flurry of job announcements in the weeks and months ahead relating to the Sarawak Corridor of Renewable Energy (Score) and in particular, the fast developing Samalaju Industrial Park.
According to recent reports, Sarawak Hidro Sdn Bhd is ramping up the 2,400MW Bakun hydroelectricity dam.
Sarawak Energy Bhd (SEB) is looking at spending over RM6 billion to develop an over-RM3 billion coal-fired power station in Balingian, Mukah, and a 500kV transmission network linking Bintulu to Kuching this year.
SEB has recently formalised a second power purchase agreement (PPA) with OM Materials Sdn Bhd for a 20-year supply of 500MW to power the latter’s US$500 million (RM1.5 billion) manganese and ferrosilicon alloy smelting plant in Samalaju.
This followed an earlier pact between SEB and Asia Minerals Ltd (AML) for the supply of 270MW of power, also for 20 years, to a similar project estimated at RM790 million.
HSL will be a direct beneficiary of the massive and rapid developments within Score, given its expertise in infrastructure and construction; and specifically in land reclamation, considering Sarawak’s large areas of swamps and marshland.
HSL currently has RM1.6 billion worth of projects in hand, of which RM1 billion is outstanding. We understand that HSL is actively bidding for energy-related projects as well.
Other potential projects include: (i) the remaining packages of the Kuching central sewerage system worth a total of about RM1.7 billion; (ii) additional flood mitigation packages worth about RM250 million in Sibu; (iii) the development of a port and additional water treatment plants at Samalaju; and (iv) various road and rural water supply jobs.
Valuations are attractive, with forward price earnings of six to eight times FY11F to FY13F. Accumulate ahead of the company securing more lucrative jobs within Score. — AmResearch, Feb 10
This article appeared in The Edge Financial Daily, February 13, 2012.
Maintain buy with revised fair value of RM2.44 from RM2.30: We have tweaked downwards our earnings forecast for FY11F by 4%, but upped FY12F and FY13F earnings by 1% to 5% after raising our order book assumption to RM600 million (against RM570 million previously) each per year.
Our upward revisions are prompted by recent news flow that has strengthened our belief in the multi-year re-rating prospects for local construction players in Sarawak.
We believe there will be a flurry of job announcements in the weeks and months ahead relating to the Sarawak Corridor of Renewable Energy (Score) and in particular, the fast developing Samalaju Industrial Park.
According to recent reports, Sarawak Hidro Sdn Bhd is ramping up the 2,400MW Bakun hydroelectricity dam.
Sarawak Energy Bhd (SEB) is looking at spending over RM6 billion to develop an over-RM3 billion coal-fired power station in Balingian, Mukah, and a 500kV transmission network linking Bintulu to Kuching this year.
SEB has recently formalised a second power purchase agreement (PPA) with OM Materials Sdn Bhd for a 20-year supply of 500MW to power the latter’s US$500 million (RM1.5 billion) manganese and ferrosilicon alloy smelting plant in Samalaju.
This followed an earlier pact between SEB and Asia Minerals Ltd (AML) for the supply of 270MW of power, also for 20 years, to a similar project estimated at RM790 million.
HSL will be a direct beneficiary of the massive and rapid developments within Score, given its expertise in infrastructure and construction; and specifically in land reclamation, considering Sarawak’s large areas of swamps and marshland.
HSL currently has RM1.6 billion worth of projects in hand, of which RM1 billion is outstanding. We understand that HSL is actively bidding for energy-related projects as well.
Other potential projects include: (i) the remaining packages of the Kuching central sewerage system worth a total of about RM1.7 billion; (ii) additional flood mitigation packages worth about RM250 million in Sibu; (iii) the development of a port and additional water treatment plants at Samalaju; and (iv) various road and rural water supply jobs.
Valuations are attractive, with forward price earnings of six to eight times FY11F to FY13F. Accumulate ahead of the company securing more lucrative jobs within Score. — AmResearch, Feb 10
This article appeared in The Edge Financial Daily, February 13, 2012.
