KUALA LUMPUR, May 23 — AmInvestment Bank has maintained its “underweight” call on construction company, Hock Seng Lee Bhd (HSL), reducing its fair value by seven per cent to 99 sen from RM1.07.
In a note today, the research house said this was due to HSL’s flattish year-on-year (YoY) first quarter 2019 (1Q19) net profit which disappointed, coming in at only 22 per cent and 21 per cent of its full-year forecast and full-year consensus respectively.
“We believe the variance against our forecast came largely from weaker-than-expected construction margins realised and lowered our assumption for construction margins,” it added.
It said HSL’s 1Q19 net profit only grew two per cent YoY as stronger property profits were offset by lower construction earnings.
“Despite a 10 per cent growth in its top line, construction earnings before interest and taxes (EBIT) fell 12 per cent as the EBIT margin contracted by 2.2 ppts to 9 per cent, which HSL attributed to ‘more projects secured via open tender and the general increase in cost of construction’,” it added.
At present, HSL’s outstanding construction order book stands at RM2.5 billion and it has secured new contracts worth about RM376 million. — Bernama
