PETALING JAYA: HSS Engineers Bhd
’s latest contract win has further strengthened its earnings visibility, with Apex Securities Research saying the engineering consultancy remains well-positioned to benefit from rising investments in Malaysia’s water infrastructure.
However, following the stock’s recent share price rally, the research house has downgraded its call on the stock to “hold” from “buy”, while trimming its target price slightly to 47 sen from 48 sen.
According to Apex Research, the latest award reinforces HSS’ position as one of the country’s leading engineering consultancies in the water resources sector.
“This award adds to a string of recent water-sector wins for HSS, reinforcing the group’s positioning as one of Malaysia’s leading engineering consultancies in the water resources space,” it said.
The research house noted that year-to-date contract wins have climbed to RM163mil, boosting HSS’ outstanding order book to RM2.28bil, equivalent to a robust book-to-bill ratio of 9.5 times based on its financial year 2026 (FY26) revenue forecast.
It added that the group continues to maintain a RM500mil tender book, providing confidence that order book replenishment will continue into the second half of FY26.
Looking ahead, Apex Research expects domestic water treatment, flood mitigation and data centre-related projects to remain the key growth drivers supporting new contract flows through FY26 and FY27.
The latest contract involves a RM34mil Lead Design Consultancy and Detailed Design Consultancy 4 package awarded by Gamuda Engineering Sdn Bhd for the Northern Perak Water Supply Scheme and the sale of excess treated water to Penang.
Apex Research views the award positively, describing it as another validation of HSS’ engineering expertise in the domestic water infrastructure segment.
Assuming a gross profit margin of 33%, the research house estimates that the new project could contribute approximately RM11.2mil in gross profit over its duration.
Despite maintaining a positive view on the company’s operational prospects, Apex Research made no changes to its earnings forecasts, noting that the latest contract falls within its FY26 order replenishment assumption of RM250mil.
The research house, nevertheless, revised its valuation lower after making a slight adjustment to the discounted cash flow valuation of HSS’ solar asset segment, resulting in a revised sum-of-parts target price of 47 sen.
It stressed that the downgrade was driven primarily by valuation rather than fundamentals, with the stock having risen to 51 sen, above both its previous and revised target prices.
The research house highlighted delays in project execution, geopolitical risks arising from overseas exposure, and weaker- than-expected order book replenishment as the key risks to its outlook.
