HSS to gain from post Covid-19 recovery jobs

“We believe that given HSS’s past track record with MRT 1 and MRT 2, the group is likely to be well-positioned to tender for larger value packages from MRT 3,” said CGS-CIMB Research in a report.

KUALA LUMPUR: With an extensive experience in various construction sub-sectors, HSS Engineers Bhd is poised to benefit from post Covid-19 recovery projects in the pipeline.

Just this week, the group secured a RM15mil job to provide engineering consultancy services for a project by the Public Works Department, adding to the RM211mil worth of new projects secured in 2021.

With the resumption of contract flows from Budget 2022 and the 12th Malaysia Plan expected this year, CGS-CIMB anticipated more upside to contract wins for the company in the first half of the year.

Additionally, its diversification into telecommunication and data centre infrastructure would mean it is able to cover more scopes of work.

HSS’ outstanding order book as at end-September 2021 stood at RM548.3mil, which provides good earnings visibility at 2.6 times the financial year 2022 (FY22) order book-revenue cover.

On the other hand, its total value of contract-in-tender as at end-Sept amounted to RM423mil.

These included the Kuching Urban Transportation System, a 5.25MW hydroelectric power plant in Perak, two bids for the proposed data centre development in Nusajaya, Johor, site management partner/commercial contract management for national 5G rollout, and free zone operating system and system integration at the Port Klang Free Zone.“We note that our order wins assumption of RM150mil per annum in FY22-23 is conservative and does not include opportunities in the RM20bil to RM30bil MRT 3 project. Tenders are scheduled to be called in the second quarter (Q2) of FY22.

“We believe that given HSS’s past track record with MRT 1 and MRT 2, the group is likely to be well-positioned to tender for larger value packages from MRT 3,” said CGS-CIMB Research in a report.

The research house is also optimistic about HSS’ prospects in highway privatisation contracts, including the PJD Link highway and Sungai Klang Expressway, as this falls within the group’s expertise.

“Overall, the revival of rail, highway, water and ports infrastructure are drivers of its order book replenishment in FY22.”

It also pointed out that HSS’ recent RM15mil contract win related to flood mitigation and bridge works could open up more job opportunities as flood mitigation contracts this year are likely to be accelerated in light of the recent floods.

Apart from its long-standing industry experience in engineering and project management services, the group’s strong track record in major government projects should also give it an advantage.

Given that HSS’ share price has fallen some 33% in 2021 due to delays in the rollout of mega contracts, CGS-CIMB opined that the stock now offers attractive risk-reward ahead of an expected rebound in job replenishment.

The research house has an “add” rating on the stock with a target price of 77 sen, pegged to a 2023 peer average price earnings ratio of 24 times.

While new jprojects remained the stock’s key catalyst, further delays in sector job rollouts could pose downside risk.

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