Stock Name: HSL
Company Name: HOCK SENG LEE BHD
Company Name: HOCK SENG LEE BHD
| Research House: OSK | Price Call: BUY | Target Price: 1.99 |
Details on the land. The 275.5 acres is part of a piece of leasehold land in Bandar Samariang Township in Kuching, Sarawaktotaling 2,795 acres. Located in therapidly expanding northern part of Kuching City and a 20-minute drive from the city centre, Bandar Samariang is an establishedtownship with some 5,000 homes and an estimated population of 25,000. The leaseon the land expires on 8 April 2098.
Samariang Aman 3 onits way. With the acquisition, HSL's landbank will swell to 890 acres.According to management, the land is earmarked for a mixed commercialand residential development called Samariang Aman 3, which is a continuation of its SamariangAman and Samariang Aman 2 developments. The proposed township will have about 1,500 landed residential homes comprising amix of semi-detached, quadruplex and terrace houses, 2,000 units of affordablehouses and 40 units of commercialshophouses. Spanning a development period of 6 to 8 years, the project as awhole is valued at a GDV of RM700m. Its initial launch is expected to takeplace as soon as 2014,.
Likely to be Internally funded. We believe theacquisition will be likely be funded through HSL's RM183.7m cash pile as ofDec 2011, which translates into an appealing RM0.32/share. With zero borrowings so far, theacquisition is unlikely to strain the company'sbooks.
BUY. While wemake no changes to our FY12 and FY13 forecasts at this juncture given that anycontribution from the proposed Samariang Aman 3 project would likely come in onlyby FY14, we continue to like HSL's strong execution track record of leveragingon its marine engineering expertise. Besides, the company is also the best proxy to Sarawak's construction play. Note that early this week, 2 South Koreancompanies -Dongbu Metal and Asia Cement' made a commitment to invest a combined USD650m in the Samalaju Industrial Park in Bintulu. That said, we continue to expectmore contracts to flow from SCORE as we believe that there may be apotential revival of infrastructure projects in this region in therun-up to the national polls. Hence, we maintain our BUYcall, at an unchanged FV of RM1.99, pegged at 12x FY12 PER.
Source: OSK188
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