by ANIS HAZIM / pic credit: ANNUAL REPORT
HB GLOBAL Ltd is projected to generate gross profit margins of between 30% and 40% from telecommunications-related projects.
Rakuten Trade Research VP Thong Pak Leng wrote in a report that HB Global’s revenue could grow by 134% and 229% to RM139.8 million and RM459.8 million for the financial year 2021 (FY21) and FY22, respectively, as the group is tapping the telecommunication business.
“We forecast the company to make net earnings of RM10.6 million in FY21 and RM39.2 million for FY22 and arrive at a target price of 76 sen based on 15 times fully diluted FY22 earnings per share,” Thong noted in the report yesterday.
Rakuten Trade recommended a ‘Buy’ call for HB Global, premised for its strong remaining orderbook and emergence of 5G that will boost the telecommunication sector.
In April 2021, HB Global acquired a 60% stake in Forward Resources and Construction Sdn Bhd (FRC) for RM66 million.
Following the acquisition, HB Global has diversified into construction and engineering solution services.
Thong noted that HB Global’s existing business of food and supply chain solutions does not provide stable income, hence, the FRC acquisition would generate recurring income and positive cashflow for the company.
FRC comes with a profit guarantee of RM20 million in aggregate for FY21 and FY22, excluding exceptional gains. FRC businesses include supply, delivery, installation, testing, commission, operation, maintenance, and deployment of the 5G infrastructure and solutions across Malaysia.
“At present, FRC has a remaining project orderbook amounting to RM1.6-RM1.7 billion, which provide earnings visibility for the next three to four years, and its existing clients include DiGi.Com Bhd, Maxis Bhd and Asiana Citarasa Sdn Bhd,” Thong said.
Furthermore, he said the company is planning to tender more projects from other telecommunications providers in the future.
HB Global shares climbed 2.9% to 36 sen yesterday, valuing the company RM273.35 million.