Sunday, March 15, 2015

Sarawak Election Stocks (Part 3)

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!


Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions  


 


 

 






1 comment:

Blogger said...

eToro is the #1 forex trading platform for beginning and established traders.

Stay VIGILANT!

US Market has been doing well last week, however, its always important to stay cautious.  Stay VIGILANT! DJIA  DJI closed higher over the we...