CIMB Research has technical sell on Hock Seng Lee at RM1.70

KUALA LUMPUR (March 8): CIMB Research has technical sell on Hock Seng Lee at RM1.70 at which it is trading at a price-to-book value of 2.3 times.

It said on Thursday that as long as prices stay below its previous high of RM1.75, there is a possibility that Hock Seng Lee might be forming a double top pattern.

“Hence, we advocate investors to adopt a sell into strength strategy here. Near term gains are likely capped at RM1.70-RM1.75.

CIMB Research said the technical landscape is deteriorating, suggesting that buying momentum is losing pace. MACD histogram bars have slipped into the negative territory while RSI has also hooked downward.

“There is a minor support at RM1.66. Once this level is violated, we expect the candles to tumble towards the neckline support (now at RM1.57). The following support levels are RM1.49 and RM1.35. Prices need to surpass the RM1.80 level to negate this bearish view,” it said.



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Stocks to watch: SapuraCrest, Dijaya, HSL, Kimlun

KUALA LUMPUR (March 7): Stocks on Bursa Malaysia may slip on Wednesday in line with the cautious global and regional markets as worries about slower growth cast a pall of gloom over investors’ sentiment.

Key regional markets posted losses of between 0.63% and 2.16% as riskier assets bore the brunt of fears that the global growth outlook is darkening and that Greece may not be able to complete a major debt restructuring deal.

Reuters reported China's lowering of its economic growth target and data pointing to Europe possibly slipping back into recession have slowly eroded the optimism on global markets generated by the European Central Bank's huge injection of loans to banks since December.

On Bursa Malaysia, late buying helped the FBM KLCI extend its gains but whether it can be sustained on Wednesday remains to be seen due to external worries.

On Tuesday, the KLCI closed 0.69 of a point higher to 1,589.91. Turnover was 1.29 billion shares valued at RM1.73 billion. The broader market reflected the cautious sentiment, with 519 decliners to 257 advancers while 315 stocks were unchanged.

Among the stocks to watch on Wednesday are SAPURACREST PETROLEUM BHD [], DIJAYA CORPORATION BHD [], HOCK SENG LEE BHD [], Kimlun Corp Bhd and Malaysia Airports Holdings Bhd (MAHB).

SapuraCrest Petroleum secured a US$54 million contract from Petronas Carigali Sdn Bhd to provide a tender rig including a mobilisation fee.

The contract was for 12 months starting April 1 with an option to extend for another 12 months.

Dijaya resumes trading after a two-day suspension for a corporate exercise. Dijaya is acquiring 40 PROPERTIES [] owned by its single-largest shareholder Tan Sri Danny Tan for RM948.7 million.

The purchase will be funded with a cash portion of RM250 million and the balance via the issuance of redeemable convertible unsecured loan stock (RCULS), with a staggered conversion price range of RM1.30 to RM2.50 over a 10-year period.

Upon completion of the proposed amalgamation exercise, the land bank will increase to 870 acres and the gross development value will increase to RM37 billion.

Hock Seng Lee Bhd plans to undertake a mixed commercial and residential property project in Bandar Samariang, Kuching with an estimated gross development value of RM700 million.

Hock Seng Lee said the project would be on 275.5 acres of land which it was acquiring from Projek Bandar Samariang Sdn Bhd for RM25.54 million.

RHB Research Institute said it was less enthusiastic on CONSTRUCTION [] stocks as it believed their share price performance is likely to be muted over the next six to 12 months as the market begins to price in a higher risk premium for construction stocks ahead of the nation’s general election that will have to be held by March 2013.

However, the research house said Hock Seng Lee would be buoyed by: (1) Projects under Sarawak Corridor of Renewable Energy (SCORE); (2) Sustained high margins given limited competition from only a small pool of Sarawak-based Unit Pendaftaran Kontraktor Negeri Sarawak (UPK) registered contractors for most public jobs in Sarawak; (3) An outstanding construction orderbook of RM1.1 billion; and (4) An added downside protection to its share price by virtue of a strong balance sheet with a net cash of RM183.7 million or 31.5sen a share as at Dec 31, 2011.

“Indicative fair value is RM1.90 based on 12 times FY12/12 EPS, in line with our one-year forward target PER for the construction sector of 10-14 times,” RHB Research.

Kimlun’s estimated outstanding book order has increased to about RM1.50 billion after it secured a RM68.29 million housing project in Johor Baru.

Its unit Kimlun Sdn Bhd had accepted a letter of award from UNITED MALAYAN LAND BHD []’s subsidiary Dynasty View Sdn Bhd to construct apartments and ancillary buildings in Johor Baru.

Meanwhile, MAHB’s franked dividend of up to 14.14 sen per ordinary share less income tax of 25% amounting to RM116.64 million will go ex on April 9 and the entitlement date is April 12.



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Hock Seng Lee plans mixed devt near Kuching, GDV RM700m

KUALA LUMPUR (March 6): HOCK SENG LEE BHD [] plans to undertake a mixed commercial and residential property project in Bandar Samariang, Kuching with an estimated gross development value of RM700 million.

It said on Tuesday the project would involve 1,500 houses comprising of semi-detached, quadruplex and terraced houses, 2,000 units of affordable housing units and 40 shophouses.

“This is expected to generate an estimated GDV of approximately RM700 million. Samariang Aman 3 is expected to commence in 2013 and will span a development period of six to eight years,” it said.

Hock Seng Lee said the project would on 275.5 acres of land which it was acquiring from Projek Bandar Samariang Sdn Bhd for RM25.54 million.



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Hock Seng Lee 4Q net profit RM26m, FY11 RM87.26m

KUALA LUMPUR (Feb 28): Sarawak-based infrastructure company HOCK SENG LEE BHD [] recorded net profit of RM26.14 million in the fourth quarter ended Dec 31, 2011, up 20.8% from the RM21.62 million a year ago, boosted by the strong performance of its marine and civil engineering businesses.

It said on Tuesday its revenue increased by 5.5% to RM158.58 million from RM150.26 million. Earnings per share were 4.76 sen compared with 3.97 sen.

For FY11, its net profit rose 18.8% to RM87.26 million from RM73.43 million a year ago while revenue increased by 19.1% to RM581.51 million from RM488.27 million.

“HSL Group’s net annual profit before tax for the financial year ended Dec 31, 2011 breached the RM100 million mark when it rose to RM116.60 million up 18% from 2010’s year-end figure of RM98.42 million,” it said.

Managing director Datuk Paul Yu announced that for FY11, the board recommended a final ordinary dividend of 9% and a special dividend of 3%.



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CIMB Research has technical sell on Hock Seng Lee at RM1.65

KUALA LUMPUR (Feb 15): CIMB Equities Research has a technical sell on Hock Seng Lee at RM1.65 at which it is trading at a price-to-book value of 2.3 times.

It said on Wednesday that Tuesday’s black candle confirmed the bearish reversal pattern on Monday.

“It seems that the RM1.75 high would likely be its near term resistance. The next downleg could potentially bring prices towards RM1.58 and RM1.49,” it said.

CIMB Research said the easing technical readings do not bode well for the stock. MACD histogram bars are losing ground while RSI has also hooked downward.

“Once the short term support at RM1.63 is violated, expect selling pressure to accelerate. Hence, any rebound is an opportunity to sell into strength. Put a buy stop at RM1.76, just in case,” it said.



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Hock Seng Lee awarded RM82m construction contract

KUALA LUMPUR: Hock Seng Lee Bhd (HSL) has been awarded a RM82.22 million road construction contract in Sarawak by the Public Works Department. The stock reached an eight-month high of RM1.72 following the award for the construction of the road linking Balingian to Jalan Persekutuan.

HSL signed the contract with PN Construction Sdn Bhd, a wholly-owned subsidiary of Nam Fatt Corp Bhd, with work for the subcontracted sum including earthworks, drainage and culverts, roads and bridges.

Construction is due to be completed in the first quarter of 2014. This new project complements an earlier contract the group was awarded for a 600MW coal-fired power plant in Balingian, which is expected to start construction this year.

In a report yesterday, Joshua Ng of RHB Research was positive on the latest development. Ng said that with an assumption of earnings before interest and tax (Ebit) margin of between 12% and 15%, the contract should fetch RM9.9 million to RM12.3 million over the construction period ending 1Q14.

Analysts expect investors to remain interested in HSL, even as interest wanes on the sector leading up to the general election. According to the RHB report, the share prices of construction stocks are expected to be muted for at least the next six months, or longer, as the market prices in a higher risk premium ahead of the general election that must be held by March 2013.

Analysts in general are bullish on HSL based on potential projects under the Sarawak Corridor of Renewable Energy (Score).

RHB, which has an “outperform” call on the company, highlighted the group’s outstanding construction order book of RM1.1 billion coupled with its strong balance sheet with a net cash of RM142.1 million or 24.4 sen per share as an added downside protection to its share price.

Analysts covering the stock have priced RM600 million in job wins this year against RM570 million in 2011 in their earnings forecasts, but with contributions to only start in 2013.

The group’s 2011 job wins totalled RM313 million, well below the management’s target and 2010’s RM532 million in contracts, said Wong Chew Hann of Maybank IB in her report last week.

The slow momentum in securing projects was due to a lack of contracts awarded by the state government. State contracts were down by 39% year-on-year (y-o-y), she added. This was not confined to Sarawak as new construction jobs reported for the whole country were down 11% y-o-y to only RM77.3 billion in 2011.

However, both AmResearch and Maybank IB have “buy” calls on the company, with fair values of RM2.30 and RM2.10 respectively. They expect construction awards in Sarawak to pick up this year in a bid to support the state’s industrialisation plans under the Score.

“We believe there will be a flurry of job announcements in the weeks and months ahead relating to the Score development and in particular, the fast-developing Samalaju Industrial Park,” AmResearch said in its report last Friday.

HSL recorded an 11.3% increase in profit to RM22.56 million from RM20.28 million in the quarter ended Sept 30, 2011 compared with a year ago. Revenue was also up by 11.9% to RM150.42 million from RM134.35 million.


This article appeared in The Edge Financial Daily, February 14, 2012.



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Good re-rating prospects for HSL

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.



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Hock Seng Lee gets RM82m road project in Sarawak

KUALA LUMPUR (Feb 13): HOCK SENG LEE BHD [] has secured a RM82.22 million contract to build a road from Balingian to Jalan Persekutan, Sibu/Bintulu, Sarawak.

The company said on Monday it had signed a subcontract agreement with PN CONSTRUCTION [] Sdn Bhd for the project which includes earthworks, drainage and culverts, road and bridges.

The project is scheduled to be completed in the first quarter of 2014.

“The contract is expected to contribute positively to the earnings and net assets of Hock Seng Lee group for the financial years ending 2012 to 2014,” it said.



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Hock Seng Lee wins RM82m road contract

Hock Seng Lee Bhd (HSL) signed a RM82.223 million sub-contract agreement with PN Construction Sdn Bhd today for the construction of a road in Sarawak.

In filing to Bursa Malaysia, HSL said the scope of works for the project from Balingian to Jalan Persekutan, Sibu/Bintulu, includes earthworks, drainage and culverts, road and bridges.

HSL said the project is due to be completed in the first quarter of 2014.

The contract is expected to contribute positively to the earnings and net assets of the Group for the financial years ending 2012-2014, it added. -- BERNAMA



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KLCI slips at mid-morning in lacklustre trade

KUALA LUMPUR (Jan 13): The FBM KLCI slipped into negative territory at mid-morning on Friday amidst lacklustre trade, while key regional markets eked out modest gains following the successful bond sales in Spain and Italy on Thursday.

On Bursa Malaysia, the FBM KLCI shed 0.19 of a point to 1,525.37 at 10am, weighed by losses at select blue chips.

Gainers led losers by 230 to 164, while 223 counters traded unchanged. Volume was 365.74 million shares valued at RM180.37 million.

Asian shares rose to a one-month high and the euro clung near its strongest in a week on Friday as strong demand for Spanish and Italian debt sales tempered risk aversion ahead of another auction from Rome later in the day, according to Reuters.

Interbank lending rates fell in a sign that worries about a credit crunch may be easing, while Asian credit markets firmed, with primary market activity picking up, it said.

At the regional markets, Japan’s Nikkei 225 rose 1.39% to 8,502.16, Hong Kong’s Hang Seng Index added 0.43% to 19,178.10, South Korea’s Kospi gained 0.68% to 1,877.18, Singapore’s Straits Times Index up 0.54% to 2,758.60 and Taiwan’s Taiex was up 0.52% to 7,224.18.

Meanwhile, the Shanghai Composite Index shed 0.19% to 2,270.60.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients Jan 13 said that due to the US markets’ quite tone last night, the local market could be in yet for another benign day of trading activity.

“From the recent 1,310.53low to the 1,493.28 high, the index held the 38.2% retracement level of 1,424.19. The market’s next swing high is probably located at 1,530.73 (Dec 30).

“If the index can surpass this level, we are poised to head to higher levels soon. Else, the index could remain quiet for now,” he said.

Among the decliners on Bursa Malaysia, F&N fell 20 sen to RM18.80, Dutch Lady 10 sen to RM26, Genting PLANTATION []s six sen to RM9.04, Sunchirin and BLD Plantations five sen each to RM1.50 and RM8, while Apollo, HSL, IOI Corp and Genting fell four sen each to RM2.91, RM1.41, RM5.45 and RM10.92 respectively.

Utopia was the most actively traded counter with 20.33 million shares done. The stock gained half a sen to 7 sen.

Other gainers included Compugates, Proton, Berjaya Corp, Palette and Lion Corp.

Gainers included Malayan Flour Mills, Supermax, Hartalega, Petronas Dagangan, Carlsberg, MBM Resources, CI Holdings, Kretam and Kian Joo.



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Maybank IB Research remains Overweight on construction

KUALA LUMPUR (Jan 11): Maybank Investment Bank Bhd Research has maintained its Overweight rating on the CONSTRUCTION [] sector and said that after an extremely dry year in terms of major work awards, 2012 has to be the year, with the Greater KL mass rapid transit (MRT) to dominate news flow.

Government land development roll-outs will also be positive for the construction sector, it said in a note Wednesday.

“We remain Overweight on the sector with our core pick being Gamuda.

“We think that the jobs will flow again in Sarawak to support the state’s industrialisation plan. Hock Seng Lee is our pick,” it said.

Maybank Research said Gamuda stays its top pick, adding that it was confident of sizeable job wins to boost Gamuda’s RM2 billion outstanding order book.

“The MRT tunnel win plus the Gemas-JB double-track rail project could raise its job size by RM4 billion each, we estimate. The stock is now trading at 13% below our RNAV-based target price,” it said.

The research house said HSL was our pick for an upturn in construction activities in Sarawak to bring large-scale energy intensive industries into the state.

“We also like Eversendai, an integrated structural steel turnkey contractor with a list of globally acclaimed landmark projects on record. Valuations are attractive at single digit forward PERs,” it said.



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RHB Research downgrades construction sector to Neutral from Overweight

KUALA LUMPUR (Dec 23): RHB Research Institute Sdn Bhd has downgraded its recommendation for the CONSTRUCTION [] sector to Neutral from Overweight.

In a note Friday, the research house said investors’ confidence and comfort level that the Klang Valley MRT project would start work soon was being chipped away by further delays in the roll-out of certain already long-overdue large-scale projects.

Even if the Klang Valley MRT project is to start work as scheduled, initial progress is likely to be painfully slow due to bureaucratic hurdles, it said.

There is generally a lack of credible new large-scale projects in the pipeline, it said.

“Gamuda and Fajarbaru are downgraded to Market Perform from Outperform.

“No changes in Outperform for TRC, HSL and Eversendai, Trading Buy for MRCB, Market Perform for WCT and Underperform for IJM,” said RHB Research.



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Billion Ringgit Club: Hock Seng Lee Bhd

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.

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.



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Hock Seng Lee 3-month earnings up 11.2% to RM22.56m

KUALA LUMPUR (Nov 22): HOCK SENG LEE BHD []’s earnings rose 11.2% to RM22.56 million in the third quarter ended Sept 30, 2011 from RM20.28 million a year ago as it benefited from more CONSTRUCTION [] activities.

The Kuching-based company said on Tuesday its revenue increased by 11.9% to RM150.42 million from RM134.35 million while earnings per share were 4.09 sen compared with 3.70 sen.

For the nine-months ended September, it said its nine-month earnings increased by 17.9% to RM61.12 million from RM51.81 million while its revenue rose 25.1% to RM422.92 million 338,010

“The increase was mainly due to the increased activities in construction segment which contributed RM146 million (97%) of the group’s revenue for the current quarter and RM405.0 million (96%) of the group’s revenue for the first nine months of 2011.

“Contribution from property development segment in the group net profit before tax for the first nine months has decreased slightly from RM7.7 million in 2010 to current year’s figure of RM6.6 million, due to timing in launching of new projects,” it said.

Managing director Datuk Paul Yu Chee Hoe said: “Our earnings and revenue results put us on a trajectory to achieving new highs for our annual financial results 2011.”



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First successful tender for Score

Hock Seng Lee (Nov 1, RM1.43)
Maintain neutral with target price of RM1.50: Hock Seng Lee Bhd (HSL) secured a contract worth RM90.3 million from the Regional Corridor Development Authority (Recoda) of Score (the Sarawak Corridor of Renewable Energy) with a contract period of 17 months.

The contract was HSL’s first successful tender for a project to be directly awarded by Recoda.

The scope of work for the project includes substantial mechanical and electrical works, earthworks, drainage and retaining structures, piling, piping and actual construction of the treatment plant and associated works.

The associated works involve the construction and commissioning of a pump house, chemical house, aerators, flocculation tanks, sedimentation tanks and other filtration process facilities.

One of the beneficiaries of Budget 2012, HSL’s current outstanding order book stands at RM1.1 billion. To date, HSL has secured RM243.2 million worth of projects. Moving forward, we will maintain our RM400 million order book replenishment assumption for HSL as it could be one of the beneficiaries of Budget 2012.

Under Budget 2012, the prime minister announced a RM5 billion allocation to provide basic rural infrastructure including roads, power and water supply.

The prime minister made particular mention of the government’s concern over clean water supply to communities in the remote areas of Sabah and Sarawak.

Rural water supply is a field that HSL is keen to pursue, drawing on its marine engineering skills.

We are maintaining our earnings projection as total project value secured is still within our order book replenishment assumption.

We are maintaining our “neutral” recommendation with target price of RM1.50 for HSL by ascribing price-to-earnings ratio of 8.2 times against FY12 earnings per share of 18.4 sen. — MIDF Research


This article appeared in The Edge Financial Daily, November 2, 2011.

HSL clinches RM90m S’wak water treatment plant job

KUALA LUMPUR: Hock Seng Lee Bhd (HSL) has secured a RM90.28 million water treatment plant project within the Samalaju enclave from the Sarawak government.

In a statement to the exchange yesterday, HSL managing director Datuk Paul Yu Chee Hoe said the job scope included mechanical and electrical works, earthworks, drainage, retaining structures, and piling and piping jobs.

“This contract marks HSL’s first successful tender result for a project to be directly awarded by Recoda (Regional Corridor Development Authority) and we hope there will be more to come,” Yu said. Recoda is spearheading the development of the Sarawak Corridor for Renewable Energy (Score), one of Malaysia’s five economic growth corridors.

According to Yu, the water treatment plant project will see the construction of pump and chemical houses, aerators, flocculation and sedimentation tanks, and filtration process facilities. The 17-month project is due for completion by April 2013.

He said site possession for the water treatment facility is expected to take place this month. The project, which brings the builder’s orderbook to RM1.7 billion, is anticipated to contribute positively to HSL’s earnings and net assets for the financial years ending Dec 31, 2012 to 2013, according to Yu.

HSL’s financials have improved. Net profit rose 22% to RM38.56 million in the first half year ended June 30 from RM31.52 million a year earlier while revenue was up 34% to RM272.51 million from RM203.66 million. The debt- free company had a cash pile of RM133.83 million as at June 30.

Covering 70,709 sq km with a population of over 600,000, Score is located in the central region of Sarawak. The enclave is rich in energy resources such as hydropower, coal and natural gas that will spur the growth of energy-intensive sectors in the state.

Designated as the new heavy industry hub for Sarawak, Samalaju is seen as a growing township where foreign investors engaged in metal-related production have set up operations. These include Japan-based Tokuyama Malaysia Sdn Bhd and Singapore’s OM Materials and Asia Minerals Ltd which have signed power purchase agreements with Sarawak Energy Bhd.

According to news reports, the Sarawak government has decided to set up a state port at Samalaju to serve industries located in Score. It was reported that Bintulu Port Holdings Bhd had received a letter of intent from the Sarawak government to submit a detailed proposal to build, own and operate a new seaport within the Samalaju enclave.

Meanwhile, Yu said rural water supply is an area the company is keen to pursue as it can leverage on its marine engineering skills and technical capabilities.

“Rural water treatment and supply is an area of great potential for HSL and it is a rewarding field given that a safe, reliable water supply has a positive impact on raising the living standard and protecting the health of our fellow Sarawakians while encouraging commerce and industry.

“We seek to have a strong presence in infrastructure projects for Score and procuring this project after an open tender exercise, demonstrates HSL’s ongoing competitiveness in sophisticated engineering and construction activities,” he said.

Prior to the Samalaju water project, HSL had last August signed a subcontract agreement with AF Construction Sdn Bhd to undertake a rural water supply project in Sibu.

The project is worth RM45.7 million.

HSL closed three sen higher to RM1.45 yesterday. Its net assets per share stood at 67 sen as at June 30.


This article appeared in The Edge Financial Daily, November 1, 2011.

OSK Research maintains FV for Hock Seng Lee at RM1.61

KUALA LUMPUR (Nov 1): OSK Research is maintaining its fair value for Hock Seng Lee at RM1.61 after the company secured a RM90.28 million contract from the Sarawak Public Works Department for a water treatment plant.

HSL received the letter of acceptance on Oct 28 from the department for the new water treatment plant, reservoir and associated facilities for the proposed Samalaju water supply in Bintulu.

OSK Research on Tuesday including this recent win, it estimates that HSL has secured close to RM250 million worth of jobs year-to-date.

“Management maintains that it would be able to hit the full-year target of RM400 million, which is in line with our assumption,” it said.

The research house said a slew of projects are in the pipeline for implementation in Sarawak under the SCORE initiative, including a technical training school (RM250 million), a 600MW coal-fired plant in Balingan, the 1,000 MW Baram hydro dam, the Samalaju-Tg Manis rail link and various rural road networks.

“Maintain BUY, RM1.61 FV. As the total job wins are still within our RM400 million replenishment target for FY11, we maintain our earnings forecast for HSL. Our FV of RM1.61 is based on 10 times FY12F earnings, which is in line with its one-year forward PER mean,” it said.

HDBSVR: KLCI to face selling pressure

KUALA LUMPUR (Nov 1): Hwang DBS Vickers Research (HDBSVR) said it expects the Malaysian stock market to face some selling pressure on Tuesday following the overnight fall on Wall Street.

It said the initial euphoria from the European debt bailout plan seems to be over. Major U.S. equity indices tumbled between 1.9% and 2.5%, triggered in part by Greece’s decision for a referendum on the new agreement on financing for the country.

“Back home, we expect our benchmark FBM KLCI not to be spared from the bearish external sentiment. The benchmark index should come under selling pressures today, possibly retreating towards our immediate support level of 1,475,” it said.

HDBSVR said on the corporate front, stocks that may be in the limelight include Jerneh Asia, following the announcement that its major shareholder, Kuok Brothers will buy out the company as a quickest way to return cash to shareholders;

Also in focus would be Hock Seng Lee, after it secured a RM90.28 million water treatment plant contract from the Sarawak state government.

Meanwhile, TRC Synergy, which was awarded a RM51.3 million contract from Jabatan Kerja Raya to upgrade infrastructures and facilities at the Lumut jetty in Perak.

Hock Seng Lee bags RM90m deal

Sarawak-based Hock Seng Lee Berhad (HSL) has secured a new rural water treatment plant project in the Sarawak Corridor of Renewable Energy (Score) worth RM90.28 million, its managing director Datuk Paul Yu Chee Hoe said today.

He said the contract period for the project, to be constructed in Samalaju 60 km north of Bintulu, one of the three growth nodes along the central coastline, would be 17 months with site possession scheduled for next month.

"The project marks the infrastructure and marine engineering specialist's first successful tender result for a project to be directly awarded by the Regional Corridor Development Authoriy (Recoda) and we hope there will be more," he said in a statement in Kuching.

He said the project scope includes substantial mechanical and electrical works, earthworks, drainage and retaining structures, piling, piping and construction of the treatment plant and associated works.

These involve the construction and commissioning of a pump house, chemical house, aerators, flocculation tanks, sedimentation tanks and other filtration process facilities, he said.

Designated as the state's new heavy industry hub, Samalaju is a growing township that has seen a recent influx of foreign investors engaged in metal-related production while Recoda is responsible for spearheading, managing and promoting the Score development. -- Bernama

Hock Seng Lee secures RM90.28m Sarawak project

KUALA LUMPUR (Oct 31): Hock Seng Lee has secured a RM90.28 million contract from the Sarawak Public Works Department for a water treatment plant.

The company said on Monday it had received the letter of acceptance on Oct 28 from the department for the new water treatment plant, reservoir and associated facilities for the proposed Samalaju water supply in Bintulu.

“The scope of works for the project includes mechanical and electrical works, earthworks, drainage and retaining structures, piling, piping and CONSTRUCTION [] of the water treatment plant itself and associated works. The works will be due to be completed by April 2013,” it said.

Hock Seng Lee said the contract was expected to contribute positively to the earnings and net assets of the group for the financial years ending 2012 to 2013.