HSS Engineer Berhad - Massive Win Bulks Up Order Book
Wed, 11-Mar-2026 08:16 am
by Tan Wai Wern • Apex Research

Counter

HSSEB (0185)

Target Price (RM)

0.50

Recommendation

Buy

Secures RM30.5m Consultancy Service Contract. HEB secured a RM30.5m contract with MMC Infra Padi Sdn Bhd for the provision of engineering consultancy services for the Jeniang Water Transfer Scheme Project Phase 2, which aims to support paddy cultivation in the Kawasan Muda area. The project is designed to enable a five-season-in-two-years paddy cultivation cycle. Works are expected to commence in March 2026 and are scheduled for completion by June 2030.

Our View. We view this contract win positively as it enhances the Group’s earnings visibility through FY30. Based on an estimated gross margin of 35%, the project is expected to generate c.RM10.7m in gross profit over its 52-month duration, equivalent to 13.0% of our FY26F gross profit. Given the Group’s proven track record in executing water-related projects, we believe execution risk remains manageable.

Outlook. With this award, the Group’s YTD contract wins have increased to RM65.0m, raising its outstanding order book to a healthy RM2.2bn, representing a book-to-bill ratio of 9.2x. The Group maintains a solid tender book of RM517m and is targeting RM300m in new contract wins for FY26, supported by favourable opportunities in domestic water treatment, flood mitigation and data centre projects. Regarding its Baghdad project, the Group has received formal assurance that all outstanding payments will be fully honoured following a recent meeting with representatives of the Iraqi government. Looking ahead, further contract awards and continued progress on the Group’s ongoing projects will be key catalysts in supporting its near-term earnings visibility.

Earnings Revision. No change to earnings forecasts as this award falls within our order book replenishment assumption for FY26 of RM250m.

Valuation. We maintain our BUY recommendation on HEB with an unchanged TP of RM0.50, based on our SOP valuation, supported by a three-star ESG rating.

Risk. Delays in project execution & delivery, foreign project exposure leading to geopolitical risks and lower-than-expected order book replenishment

 

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