Hock Lian Seng

[GFG]

Hock Lian Seng got a new contract to build Maxwell station for $222 million

The Board of Directors of Hock Lian Seng Holdings Limited (the “Company” ) is
pleased to announce that Hock Lian Seng Infrastructure Pte Ltd, a wholly-owned
subsidiary of the Company has been awarded Contract T223 from Land Transport
Authority for the Construction of Maxwell Station for Thomson Line (the “Project”).
The contract sum is approximately $221.8 million.
The Project will commence in April 2014 and is expected to complete by December

2020.
The Project is not expected to have a material impact on the consolidated net
tangible assets per share and consolidated earnings per share of the Group for the
financial year ending 31 December 2014.
None of the Directors or Controlling Shareholders of the Company has any interest,
directly or indirectly, in the Project.


$221.8million!
That's a HUGE boost to their order books, and will provide earnings visibility all the way to 2020.

It is one thing to be awarded a big LTA contract, another thing to make a decent profit out of it - particularly for the last few contracts awarded on a line when all of those who haven't been awarded the early contracts are fighting for the remaining ones.

HLS has always protected their margins. In fact, their revenue has been decreasing every yr for the past 4 yrs, but their GPM has been increasing such that net profit has maintained or increased
In all the results releases, they have also mentioned that foreign competitors have come in to compete for projects at lower margins, hence they have been selective in their bids. Prior to this contract win, their order books have decreased drastically
Now this huge win gives a lot of earnings visibility from FY 15 onwards

[GFG]

Bring up this thread....

Recently announced wining of project over S$100Mil, but any buddies know how the sales of the Skywood, Ark@Gambas and Ark@Kaki Bukit?

Sales for skywood not good, according to caveats lodged, only ard 50 units out of 420 units launched are sold
Their partner, king wan, recorded some losses from their property division in their latest FY14Q3 results, I am assuming that comes from the skywoods project

The ark at gambas and kb though, are doing very well
Gambas is almost fully sold, and it's launched earlier
Both of these project are recorded via the COC method according to accounting rules, so I am expecting a big profit boost in FY 15Q1 when they TOP
Already, they are recording costs incurred such as commissions.

Honestly though, there are few earnings drivers for FY14.

Their marina coastal expressway and gali batu projects are completed, with minimal if any, revenue left. The changi project will only contribute after FY14.

My worry is that hls is still not GREEN AND GRACIOUS BUILDER certified. After FY14, those not certified will not get the license to tender BCA contracts.
I have emailed management about this but have yet to receive a reply

(Vested 600lots)

Wow 600 lots mean a lot, wonder if you are in the top 20 list

I don't know much about HLS but I do like companies that tender government projects, as it will be benefited be it a boom/doom economy. My concern is mainly on its development project particularly the Skywood as it was a new launch luxury project and located so so far away from town. But on the positive side, I think the 6 over percent of dividend should be sustainable.

As for the GREEN AND GRACIOUS BUILDER, obviously this is something new to me, I am not sure but since they have been working with LTA and BCA for so long, I think their chances in getting registered should be quite high. I do not think that the government would want to work with contractors that are not up to certain standards.

Anyway, thanks for your valuable information!!

Here's more information on the Green and gracious builder scheme.
It's not released by HLS, but you can find the information on BCA website.

Q: Is GGBS compulsory for me?
A: Currently, companies which wish to apply for or retain their BCA Contractors
Registry System (CRS) registration in work heads CW01 and CW02 and
financial grades from A1 to B2 are required to obtain GGBS by the following
dates:
A1 & A2: By 1 Jan 2015
B1& B2: By 1 Jan 2016

This is HLS's certification and when it expires:
CW01 General Building A1 1/7/2014
CW02 Civil Engineering A1 1/7/2014
CR08 Piling Works L5 1/7/2014
SY01A Essential Construction Materials L6 1/7/2014
SY01C Other Basic Construction Materials L6 1/7/2014


I view their A1 grades (ability to tender for any quantum worth of project) under workheads CW01 and CW02 as one of their competitive edges. Which is why I am paying attention to this lack of certification.

Still no reply from management yet regarding my query.

Management still did not reply my queries...
But i checked and noticed the licensing has been renewed. This is from the BCA website:
CW01 General Building A1 1/7/2017
CW02 Civil Engineering A1 1/7/2017
CR08 Piling Works L5 1/7/2017

They just did a 3 year renewal, and so "bypassed" the requirement for them to be "green and gracious builder" certified before they can renew. So now there's time to get certified before the next renewal in 2017. (from Jan 2015 onwards, all applicants and renewals will have to be green and gracious certified)

Also, notice they have lost their license for Building Materials:
SY01A Essential Construction Materials L6 1/7/2014
SY01C Other Basic Construction Materials L6 1/7/2014

It's not renewed.
Don't think this has a big impact though as they have not been utilising it all this while. Although with the current focus on new building materials and building techniques that are efficient, productive and green, I'm a bit disappointed to see no growth in this aspect. It seems HLS is a very traditional construction company, focussing on getting projects with protected high margins, but with minimal or no growth.

<Vested>

[BlueKelah]

being played this new year, moving up very fast to historical highs without any news.

[brattzz]

traditional family biz is good...
have to know the sg market well to be able to operate profitably,

[GFG]

being played this new year, moving up very fast to historical highs without any news.

Not that there's no news...
Hock lian seng's 2 industrial projects at kaki bukit and gambas are going to TOP soon
These 2 projects have "completed contracts" revenue recognition
In other words, the expenses are already recognized, but the revenue will only be recognized upon TOP
TOP is slated to be sometime early 2015

Upon TOP, HLS will recognize a big jump in revenue.
Both projects also have very good sales. One is 99% sold, the other is ard 75% sold.

(Vested)

[GFG]

Bring up this thread....

Recently announced wining of project over S$100Mil, but any buddies know how the sales of the Skywood, Ark@Gambas and Ark@Kaki Bukit?

Sales for skywood not good, according to caveats lodged, only ard 50 units out of 420 units launched are sold
Their partner, king wan, recorded some losses from their property division in their latest FY14Q3 results, I am assuming that comes from the skywoods project

The ark at gambas and kb though, are doing very well
Gambas is almost fully sold, and it's launched earlier
Both of these project are recorded via the COC method according to accounting rules, so I am expecting a big profit boost in FY 15Q1 when they TOP
Already, they are recording costs incurred such as commissions.

Honestly though, there are few earnings drivers for FY14.

Their marina coastal expressway and gali batu projects are completed, with minimal if any, revenue left. The changi project will only contribute after FY14.

My worry is that hls is still not GREEN AND GRACIOUS BUILDER certified. After FY14, those not certified will not get the license to tender BCA contracts.
I have emailed management about this but have yet to receive a reply

(Vested 600lots)

I did mention about this almost a year ago.

[BlueKelah]

being played this new year, moving up very fast to historical highs without any news.

Not that there's no news...
Hock lian seng's 2 industrial projects at kaki bukit and gambas are going to TOP soon
These 2 projects have "completed contracts" revenue recognition
In other words, the expenses are already recognized, but the revenue will only be recognized upon TOP
TOP is slated to be sometime early 2015

Upon TOP, HLS will recognize a big jump in revenue.
Both projects also have very good sales. One is 99% sold, the other is ard 75% sold.

(Vested)

would think that those TOPs are already factored into the price much like Weehur which did not jump much after their good Q3 results.

apparently they do not seem to have factored in yet. Maybe someone has leaked that there will be a big bonus dividend ang pow from HLS this year.

was considering vesting @.265 but the MOS was not enough yet.

[GFG]

being played this new year, moving up very fast to historical highs without any news.

Not that there's no news...
Hock lian seng's 2 industrial projects at kaki bukit and gambas are going to TOP soon
These 2 projects have "completed contracts" revenue recognition
In other words, the expenses are already recognized, but the revenue will only be recognized upon TOP
TOP is slated to be sometime early 2015

Upon TOP, HLS will recognize a big jump in revenue.
Both projects also have very good sales. One is 99% sold, the other is ard 75% sold.

(Vested)

would think that those TOPs are already factored into the price much like Weehur which did not jump much after their good Q3 results.

apparently they do not seem to have factored in yet. Maybe someone has leaked that there will be a big bonus dividend ang pow from HLS this year.

was considering vesting @.265 but the MOS was not enough yet.

Vested at 0.25-0.255
@ 0.25-0.255 range, the PER then was ard 5
ROE is consistently ard 20%
P/BV 0.9
Div yield (conservatively 1.8cebts) was about 7.2%
DCF is favorable, using discount factor of 6% over 20yrs

More importantly, although revenue has been decreasing over the past few yrs, profitability is maintained cos margins have been increasing
If u compare to peers, others have been sacrificing margins to secure projects
As a business owner myself, I can understand how hard it is to maintain your margins whilst others are undercutting you.
So kudos to the management team for that.
Already there are some civil engineering companies who have run into problems by operating on too thin margins.
Again, I wrote in an earlier post that HLS always protects their margins

Only mis step is their JV into residential property aka skywoods, which has not been doing well. Even then, their exposure is limited as there's a consortium. They also get business from the construction side.
Still not selling my 890lots at this price, though I've stopped queuing for more with the run up in price.

[BlueKelah]

continue running up in price, go figure, maybe Mr. market realise its value a.k.a someone is playing this share, or maybe big news coming soon...

[GFG]

continue running up in price, go figure, maybe Mr. market realise its value a.k.a someone is playing this share, or maybe big news coming soon...

Still rising very strongly on high volumes. $0.37 now.
IMO, it is currently fairly valued but no longer has the same MOS
Still not selling any of my lots, pending the release of fy14q4 results

I am expecting mediocre/average Q4 results, but 2015 is likely to be a stellar year with the TOP of the 2 industrial projects
2016 is looking good too because many projects would be in the middle phase where they start to recognize revenue, using the percentage of completion method.