PETALING JAYA: HSS Engineers Bhd
expects replenishment order wins of RM300mil from the company’s bread and butter projects without any contribution from the larger local government infrastructure projects in the financial year ending Dec 31, 2026 (FY26).
Year-to-April, the company has secured RM75mil in projects and CGS International (CGSI) Research expects HSS to capitalise on recent government/state-led infrastructure awards for design/supervision roles such as Stage 1 of the Ulu Padas water treatment plant project and the Johor E-ART, which were recently awarded.
It believes the re-rating catalysts for the stock would be the first milestone payment for the Baghdad Metro project and a faster award for the MRT 3 project in Kuala Lumpur where it acts also as the project management consultant.
Downside risks include delays in receiving cashflows from the Baghdad Metro project and risks from venturing into a new foreign market.
Apex Research said the company’s headline order book of RM2.1bil remains sizeable but remains cautious on its near-term outlook given the limited progress of the Baghdad Metro and MRT3 projects, which collectively account for an estimated RM1.6bil in unbilled orders.
Excluding these projects, the company’s effective unbilled order book declines to about RM550mil, equivalent to only 2.3 times its FY26 forecasted revenue, suggesting weaker earnings visibility moving forward.
Apex Research revised downward its revenue estimates and for FY26, estimates core net profit to be 28.5% lower, with FY27’s core net profit 24% lower.
It maintains a “buy” call on the stock with a reduced target price of 48 sen from 50 sen.
On its services segment, it applies an unchanged 6.9 times price-to-earnings ratio to roll forward FY27 earnings per share of 5.4 sen. The risks to its call include delays in project execution and delivery, foreign project exposure leading to geopolitical risks and lower-than-expected order book replenishment.
The company has increased its reliance on short-term financing to support working capital requirements.
CGSI Research reiterates its “add” call on the stock in view of its capital expenditure-light business model and its positioning at the front of the construction value chain.
This points to a more leveraged working capital position, continued reliance on short-term financing could place pressure on liquidity if operating cash flow and receivables collection do not improve accordingly, Apex Research added.
CGSI Research reiterates its “add” call on the stock in view of its capital expenditure-light business model and its positioning at the front of the construction value chain.
Its discounted cash flow target price is maintained at 81 sen a share.
In mid-February 2026, Iraq’s Finance Ministry approved the payment for the first 10% of PMC work for the Baghdad Metro project, with the payment now at the commercial banking stage but HSS has yet to receive the first milestone payment, making this a key overhang for the share price.
