HSL (Hock Seng Lee)
After publishing this blog, we saw CMSB had moved up, hence I'm not going to talk about it but this time we gonna talk about HSL.
Why HSL?
HSL is one
of the largest construction company which specify in Marine Engineering, Civil
Engineering, Land Reclamation, Dredging, Building Construction and Property
Development.
The company
is specify in Mass Land Reclamation and Dredging, infrastructure constructing
such as road building, fly over, water treatment plant and flood control
planning. The company had turn lots of the mangrove to industrial area,
resorts, shopping center, International port, Airport as well as highway.
Let's look at the fundamental 1st:
Order Book
According
to the press statement on 27 February 2015, HSL still have order book worth of
RM2 billion while outstanding order is at RM950 million.
According
to the initial report of Kenanga on 2014 April, we saw that most of the job is
in Sarawak.
Revenue
We saw that
the revenue of the company had been growing since 2004 where the CAGR of the
growth is 7%.
Income
The PAT of
the company has been growing since 2004 and it has been a profit making company
since 2004 even there is financial crisis in the market where the CAGR is
9.71%.
Operating
Margin of the company has been quite stable where it is one of the construction
Company that enjoin high margin.
Cash on
hand
Other than
having good margin, the company is a net cash company which is a very weird
company compare to its peers as most of it has high gearing ratio.
Liabilities
The company
has no borrowing from the banks which making it a 0 gearing company, once
again, a very weird and outstanding company compare to its peers.
Equities
The company
has strong retained earnings which is 5 times of its share capital and it is good
enough for the company to do 1 for 5 bonus issue!
Strong
Assets in the pocket
Look at the
table below, Enough said.
Why HSL?
Looking at
the past year, we saw that HSL get at least RM250 million project each year, on
the other hand, we saw that Sarawak will be having Election next year hence we
believe the Pan Borneo Highway that worth of RM27b will be distributed. Do you
think HSL will get part of the project?
Looking at
the management team and Chairman of HSL, we strongly believe that MR Buang the
chairman of HSL might get a piece of cake for HSL. If HSL able to secure RM500
million project then their net book order will be at historical high, so do you
think the share price will follow?
Imagine the
price now is RM1.75 for having RM2 billion book order, lets assume RM 1 billion
equals to RM0.88, hence having RM2.5 bil book order then the price should be
traded at RM2.20, what if they get project worth of RM1 bil in this year? RM 3
bil book order is going to worth RM2.64!
Why do we
think HSL can win the project?
Let’s take
a look at the past record of HSL.
They are specialized
in road building while they have a very strong political background chairman,
hence I don’t see any reason for them to not win any part of the Pan Borneo
Highway!
Last but not least
HSL do also
have a call warrant that is HSL-CC issued by Maybank IB where its conversion ratio is 3 to 1 with
the exercise price of RM1.88 and it will expire on 28th August 2015.
This will be a good instrument for the brave hearts!
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