PETALING JAYA: Engineering and project management consultant HSS Engineers Bhd expects to see a revival in the public transportation and water infrastructure projects, as the federal government is anticipated to roll out pump-priming initiatives to generate multiplier effects in the overall economy.
The positive progress of ongoing projects and contained operating expenditure enabled the group to report RM2.65 million net profit in the second quarter ended June 30, 2020 (Q2’20), a turnaround from net loss of RM2.81 million a year ago on the back of higher revenue.
For H1’20, the group’s net profit similarly turned around to RM4.93 million from RM2.48 million net loss a year ago, with its revenue climbing 15.1% to RM82.83 million from RM71.96 million.
Revenue in the engineering services segment, consisting of engineering design and construction supervision, grew 33.1% to RM69.8 million, from RM52.4 million a year ago due to contributions from newly secured projects which includes ECRL scheme and preliminary design and the Iskandar BRT projects.
Project management services revenue declined to RM9.1 million in H1’20, versus RM13.7 million previously, largely due to the variation in scope in the Klang Valley Mass Rapid Transit Line 2 (KVMRT2) contract as well as the revision on the completion date, but was mitigated by revenue generated in the Northern Corridor Economic Region contract.
As at June 30, 2020, the group’s unbilled order book stood at RM524.8 million which includes ongoing works for ECRL, BRT and Langat 2 Water Supply Scheme which is slated to provide earnings visibility for the next two to four years. The group is tendering for RM180 million worth of projects across various sectors in transportation, port and water, with close to 63% consisting of engineering design projects.
HSS executive vice chairman Tan Sri Kuna Sittampalam said the government recognises that capital investment in the construction industry, particularly the infrastructure domain, is key in stimulating the economy.
“We are looking to reprise our role to participate in and support these nation building projects. To this end, we are tendering for RM180 million worth of projects currently, with more than 60% from the engineering design segment, the key initiation stage of any major undertaking. We aim to bolster our order book further as we help the nation continue its crucial economic development phase,” he said in a statement.
The group remains optimistic of seeing revival in major urban transportation as well as water infrastructure projects, which includes the KVMRT3, Bayan Lepas Light Rail Transit, Johor Baru - Singapore Rapid Transit System, Kuching LRT and Interstate Water Transfer schemes such as Sungai Perak Raw Water Transfer Scheme, Development of Rasau Water Supply Scheme, Sarawak Grid Study as well as non-revenue water mitigation measures.
Further to this, the group also sees opportunities in the port industry. A long-term client Westport has a proposed expansion plan to double its container-handling capacity to about 28 million twenty-foot equivalent units a year by 2040. Westport has proposed to develop eight additional berths comprising Container Terminal 10 to Container Terminal 17 to support the expected long-term growth in the coming decades.
The group is in active pursuit of a fourth vertical to its current revenue portfolio to provide a source of sustainable and recurring revenue, focusing on the renewable energy sector with guaranteed off take by the service provider, which would involve some equity participation by the group. The group is currently pursuing large scale solar @MEnTARI (LSS) tender.
The group remains committed in its regional expansion plan to expand its footprint to the Asean region particularly Indonesia and Philippines, as well as India, mainly in the transportation and water sectors. However with the degree of rising nationalism in Indonesia and Philippines, the group will need to evaluate the commitment of these countries to their high-growth infrastructure development plans, and as such the realistic mid-to-long term opportunities present to the group.
The group is to commence supervision services for North-South Commuter Railway Extension project in Philippines in association with its Japanese partner in the fourth quarter of 2020. The delay in the commencement is due to the Covid-19 pandemic.