Rakuten Trade recommends "buy" call on HSS Engineers

PETALING JAYA: Rakuten Trade is positive on HSS Engineers Bhd, advocating a "buy" call with a target price of RM1.05, with its proposed transfer to the Main Board deemed as a key re-rating catalyst.

The target price represents a 32% premium on the company's closing price yesterday of 79 sen.

Since debuting on the ACE Market in August 2016, Rakuten said HSS has managed to secure an additional RM103 million of contracts, pushing its total order book to around RM380 million which will keep them busy for the next five years, providing earnings visibility.

The company enjoyed solid net margins of over 10% and compounded annual growth rate (CAGR) of over 11% in revenue over the last 3 years.

HSS still has a balance of RM24 million from the listing proceeds, which has been earmarked for expansion and/or merger and acquisition (M&A) activities.

Rakuten said HSS has a healthy gearing of 0.2 times, which should enable it to diversify into the water & power sectors to catch the wave from government’s spending on the water industry and utilities power plants capex.

“Should this materialise it will provide instant positive impact on their earnings as they are eyeing at strategic companies that has operating track record in their respective fields,” it noted.

HSS is involved in Malaysia’s key major infrastructure projects such as KL-Singapore High Speed Rail project and the East Coast Rail Line is a testament of their unique engineering project management expertise which provides them a sustainable competitive edge, while working closely with major construction player.