Friday, December 3

HSL foresees RM600 mln worth of job procurement

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KUCHING: Engineering and construction player, Hock Seng Lee Bhd (HSL) should be able to meet its RM600 million new job target for 2010 having secured RM432 million year-to-date.

POTENTIAL NEW JOB: The Mubadala’s US$7 billion (RM 21.7 billion) worth of investment pledge and a good share of the 2011 National Budget allocation are the keys to benefit HSL.

According to a research report by Maybank Investment Bank Bhd (Maybank IB Research), HSL’s outstanding order book stood at RM1.25 billion was sufficient to provide for two years of strong earnings growth of more than 20 per cent per annum into 2011.

An analyst from the research firm, Wong Chew Hann stated that the recent Mubadala’s US$7 billion (RM 21.7 billion) worth of investment pledge and a good share of the 2011 National Budget allocation were the indications of rising construction job flows in Sarawak which listed HSL as one main key beneficiary.

The Abu Dhabi investment arm’s tie-up with 1Malaysia Development Bhd (1MDB), inked on October 8, may lead to an investment of up to US$7 billion for projects in Sarawak’s Corridor of Renewal Energy (SCORE) including an aluminium smelter plant.

With the Bakun hydropower project ownership moving to the state, Sarawak will be able to price electricity more competitively, to draw new energy intensive industries. Mubadala is the second major win for SCORE.

“In January this year, 1MDB inked an agreement with China’s State Grid Corporation for three hydro dams and an aluminium smelter plant in SCORE,” enthused Wong.

Some RM4 billion of the total RM49 billion development expenditure under the National Budget 2011 was allocated to Sarawak under the Economic Transformation Programme’s (ETP) National Key Result Areas projects, according to the Chief Minister, as reported in the research report.

Wong added “Most of this is for rural infrastructure projects comprising roads, water and electricity. In addition, 68 of the ETP’s 131 Entry Point Projects (EPP) will impact Sarawak, according to Prime Minister Najib. Sarawak contractors will benefit from infrastructure demand to support the EPPs.”

In conclusion, Maybank IB Research pegged HSL a target price of RM2.30 per share.