KUALA LJUMPUR (July 6): AmResearch Sdn Bhd has maintained its But rating on Hock Seng Lee Bhd (HSL) at RM1.65 with a fair value of RM2.59, which includes a PE of 9x against its 3-year average forward earnings for its construction division.
The research house in a note Thursday said the valuation was supported by net cash of 40 sen per share and RNAV for its 890acre-landbank at 65 sen per share.
HSL on Thursday announced the securing of a RM291mil contract for the construction of a UiTM new campus in Mukah, Sarawak.
It signed the agreement with concessionaire KP Mukah Development Sdn Bhd yesterday for the design, construction, and commossioining of the campus facilities.
AmResearch said that following this, its year-to-date new orders have been bumped up to about RM472mil, well surpassing that of RM313 million for the whole of last year.
Of the more than RM2.0 billion worth of jobs (including the new UiTM job) currently in hand, over RM1.3 billion remains outstanding, it said.
“We maintain our annual new order book assumption at RM600mil for FY12F-FY14F. For FY12F, that would very likely be achieved, if not exceeded. We also maintain our overall group EBITDA margin assumption at 18%.
“The stock is currently trading at an undemanding FY12F-FY14F PEs of 7x-10x. We reiterate our BUY call for its clear earnings visibility, strong balance sheet with RM200mil of cash reserves, and as a proxy to the strong growth in the state’s construction sector,” said AmResearch.