PETALING JAYA: Hock Seng Lee Bhd’s (HSL) construction revenue is expected to remain stable, backed by its RM2.2bil outstanding orderbook.
RHB Research in a report said it is maintaining its RM600mil orderbook replenishment forecasts for HSL for 2020 and 2021.
“We believe earnings will rebound in 2021, in anticipation of better progress billings due to a sizeable earnings deferment and an improved operating environment for the construction and property businesses.
“As a key local player in Sarawak, HSL stands to benefit from the state’s RM7bil allocation for development expenditure in 2020.”
Kenanga Research, meanwhile, said HSL’s construction operations were “still at snail pace.”
“Currently, construction operations are still slow at 30% and 40% utilisation as of June. Management remains cautious about activities picking up in the near horizon due to labour shortage issues and the strict compliance of safety precaution at work sites.”
The research house said HSL’s current orderbook would provide earnings visibility to the company for the next three years.
“Year-to-date, HSL has yet to secure any contracts, against our replenishment expectation of RM500mil. Nonetheless, we are keeping our target unchanged for now, backed by tenders for the Sarawak coastal road, trunk roads and the water works projects that could be rolled out in the second half of 2020.
“For the second quarter of 2020, with the absence of revenue for almost two whole months, coupled with running fixed costs during the peak of the movement control order (MCO), we expect HSL to dip into losses before gradually recovering in the second half of this year.”
HSL’s net profit fell by 46.3% to RM7.57mil in the first quarter ended March 31, compared with RM14.11mil a year ago, as it was impacted by the onset of the MCO.
The company said its pre-tax profit fell to RM10.13mil compared with RM18.76mil. Its revenue was down by 23.3% to RM112.39mil from RM146.72mil. Earnings per share were 1.37 sen compared with 2.56 sen.
Of the revenue of RM112.39mil, the construction segment contributed RM101.25mil, or 90%, while property development delivered RM11.15mil.
MIDF Research said HSL’s earnings lagged the research house’s and consensus expectations.
“HSL’s first-quarter 2020 earnings declined 46.1% year-on-year to RM7.6mil, which lagged our and consensus expectations at 11.4% and 12.5% of full year 2020 forecasts, respectively.
“The on-year decline was attributable to the MCO implementation from March 18,2020. Moreover, the lockdowns in China since February also adversely impacted the material supply chain.”
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