HSS Engineers in sight to gain from deals rollout

The firm kicked off FY22F with RM15m contract win related to flood mitigation and bridge works 

By ANIS HAZIM / graphic by TMR

HSS Engineers Bhd is likely to see recovery in engineering and project management services contracts awarded for calendar year 2022 (CY22). 

CGS-CIMB Securities Sdn Bhd’s analyst Sharizan Rosely stated this is in anticipation of the resumption of contract flows budgeted for in Budget 2022 and the 12th Malaysia Plan. 

The analyst is positive on HSS Engineers’ diversification into telecommunication company and data centre infra, and anticipates a pick-up in contract rollouts in Sarawak post-elections as well as water infrastructure contracts. 

HSS Engineers also has strong rail credentials and would benefit from the Mass Rapid Transit Circle Line (MRT Line 3) mega project, he noted in a report on the consultancy group on Wednesday. 

HSS Engineers has an outstanding orderbook of RM548.3 million as at the end of September 2021, which provides earnings visibility at 2.6 times of financial year 2022F (FY22F). 

“In 2021, the group secured RM211 million worth of new contracts, which was commendable, given the Covid-19 pandemic. As at the end of September, the total value of contracts-in-tender amounted to RM423 million,” Sharizan wrote in the report. 

Among the contracts HSS Engineers is bidding for are the Kuching Urban Transportation System and the 5.25-megawatt hydroelectric power plant in Perak. 

The company has two bids for the proposed data centre development in Johor, and contract management for the national 5G rollout, as well as the free zone operating system and system integration at the Port Klang Free Zone. 

“We anticipate more upside to contract wins in the first half of CY22F supported by the guided 50% success rate for its RM423 million tender book. 

“Our order wins assumption of RM150 million per annum in FY22 to FY23F is conservative and does not include opportunities in the RM20 billion to RM30 billion MRT Line 3 project which tenders scheduled to be called in the second quarter FY22F,” he noted.

CGS-CIMB is optimistic about HSS Engineers’ prospects in highway privatisation contracts, including the Petaling Jaya Dispersal Link highway and Sungai Klang Expressway which fall within the group’s expertise.

“The revival of rail, highway, water and ports infra are drivers to its orderbook replenishment in FY22F,” the analyst added.

HSS Engineers kicked off FY22F with RM15.1 million contract win related to flood mitigation and bridge works. 

“This could open up more job opportunities as flood mitigation contracts this year are likely to be accelerated in light of the recent floods,” Sharizan said. 

HSS Engineers’ share price however fell 33% in 2021 due to delays in the rollout of mega contracts. 

“As such, the stock offers attractive risk-reward ahead of an expected rebound in job replenishment — the stock’s key catalyst,” he further said. 

CGC-CIMB has an ‘Add’ call for HSS Engineers with a 77 sen a share target price, pegged to a CY23F peer average price earning of 24 times. 

Downside risk to the share price outlook would be delays in sector job rollouts. 


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