HSL’s earnings anchored by state’s sewerage needs

KUCHING: The state’s strong sewerage needs will be an anchor to Hock Seng Lee Bhd’s (HSL) future earnings prospects,

This sentiment was shared by MIDF Amanah Investment Bank Bhd (MDIF Research) in spite of disappointing results from HSL in the last financial quarter.

However, following a visit to the Kuching Wastewater Treatment Plant and HSL’s housing development project – La Promenade, the research arm has emerged from the trip with strong reassurance of the group’s outlook.

Going forward, HSL would likely be anchored by the strong need of efficient wastewater and sewerage connection in Kuching, Miri and Sibu to accommodate for its growing populations.

“In a revised master plan in 2007, Sarawak Sewerage Department (SSD) estimated that three wastewater plants would be needed to support the population in Kuching.

“The SSD has also earmarked a total of four phases of Wastewater treatment plant in Miri amounting to RM3.3 billion,” the research arm reported.

Since then, HSL was awarded the second package of Kuching’s Centralised Wastewater management system in March 2016, which amounted to RM750 million for HSL’s orderbooks.

Note that the award was given to the HSL and Nishimatsu Construction (M) Sdn Bhd consortium led by HSL who held a 75 per cent stake in the consortium.

More recently (March 2017), HSL has also clinched another award for Miri Wastewater Treatment Phase 1.

The research arm explained that HSL’s key competency in sewerage and wastewater engineering such as micro tunnelling and piping would be instrumental for the group as they stand to receive similar work packages in the future.

“Thus, we reckon that due to its key expertise in micro tunnelling and sewer piping, HSL will stand to benefit in the future,” opined the research arm.

Besides this, Midf Research also reckons that affordable housing in the state will be a levelling factor to even out HSL’s earnings blips from its progress billings and project recognitions.

“We notice that HSL’s land banks are strategically located to be developed under the public housings such as the People’s Housing Project (PPR) and the 1Malaysia Civil Servants Housing Project (PPA1M) in Muara Tebas and Muara Tuang respectively.”

Additionally, the research arm also expects HSL to take opportunities in the state approved 18,787 units of PR1MA houses in upcoming quarters.