HSS Could See Stronger Quarter Driven By Baghdad Project
HSS Could See Stronger Quarter Driven By Baghdad Project
So far, HSS and its JV partner have billed the client 10% for the first milestone payment (to be recognised in 3Q24F) and a further 15% will be billed by 4Q24F. This contract is important for HSS as it contributes 35% of its total orderbook of RM2.1bn as at Nov 24, has superior GP margins of 40% (vs. local jobs' c.30%) and enables it to diversify out of its MRT 3 PMC contract, on which there has not been clarity regarding the award of the civil portions. A positive catalyst to watch out for is the formalisation of another Iraq project by 4Q24F, i.e. the Naja-Karbala rail project worth US$5.35bn, where the house estimates the total PMC and CSS fees to be c.RM211m.
HSS Engineers's 3Q24F results are due out on 20 Nov. with CGS Investment Bank estimating the quarter to be stronger qoq and yoy in terms of net profit, driven by maiden contribution from its Baghdad metro contract (Baghdad) won in July 24. This will help compensate for the absence of meaningful contribution from its MRT 3 project management consultancy (PMC) contract.
HSS工程公司2024年第三季度的業績預計將於11月20日公佈，中國銀河投資銀行預測該季度的淨利潤在環比和同比上會更強，受益於2024年7月贏得的巴格達地鐵合同的首次貢獻。這將有助於彌補其MRt 3項目管理諮詢（PMC）合同缺乏重大貢獻的情況。
According to HSS, total estimated fees for the Baghdad metro are RM1.49bn, of which HSS's 50% share is RM745m. Of this amount, RM249m (0.6% of total construction cost of RM83bn) relates to the PMC work that commenced in Jul 24 and ends in 3Q25F. Thereafter, the construction supervision services (CSS) contract worth RM497m (1.2% of construction cost of RM83bn) will commence in 3Q25F and end in May 29F. The JV will receive an advance payment of RM74.5m (HSS: RM37m), 15% of the PMC work.
根據HSS的估算，巴格達地鐵的總費用爲14.9億馬幣，其中HSS的50%份額爲7.45億馬幣。其中，2.49億馬幣（佔總施工成本830億馬幣的0.6%）是與2024年7月開始並於2025年第三季度結束的PMC工作相關。隨後，價值4.97億馬幣（佔施工成本830億馬幣的1.2%）的施工監督服務（CSS）合同將在2025年第三季度開始，並於2029年5月結束。合資企業將收到7400萬馬幣的預付款（HSS：3700萬馬幣），這是PMC工作的15%。
The negative operating cashflow in 2Q24, which was due to a key client migrating to a new payment system, has been resolved and HSS should be cash flow positive in 3Q24F. Key milestone for Baghdad reached; advance payment soon. According to HSS, a positive milestone was achieved for the Baghdad metro when the JV raised the required performance bond and bank guarantees, which will be submitted to the relevant authority. Approval, which HSS expects in end-Nov 24F, will pave the way for the advance payment to be received by Dec 24F.
由於一位主要客戶遷移到新支付系統，2024年第二季度的負經營現金流問題已經解決，HSS預計在2024年第三季度將實現正現金流。巴格達達成了關鍵里程碑；預付款即將到來。根據HSS的說法，在巴格達地鐵項目中，合資企業成功籌集了所需的履約按金和銀行擔保，這將提交給相關當局。HSS預計在2024年11月底獲得的批准，將爲2024年12月收到預付款鋪平道路。
So far, HSS and its JV partner have billed the client 10% for the first milestone payment (to be recognised in 3Q24F) and a further 15% will be billed by 4Q24F. This contract is important for HSS as it contributes 35% of its total orderbook of RM2.1bn as at Nov 24, has superior GP margins of 40% (vs. local jobs' c.30%) and enables it to diversify out of its MRT 3 PMC contract, on which there has not been clarity regarding the award of the civil portions. A positive catalyst to watch out for is the formalisation of another Iraq project by 4Q24F, i.e. the Naja-Karbala rail project worth US$5.35bn, where the house estimates the total PMC and CSS fees to be c.RM211m.
迄今爲止，HSS及其合資夥伴已向客戶開票10%作爲第一個里程碑的付款（將在2024年第三季度確認），預計到2024年第四季度再開票15%。這項合同對HSS而言非常重要，因爲截至2024年11月，它佔其總訂單量21億馬幣的35%，且具有40%的較高毛利潤率（相比之下，本地項目約爲30%），並使其能夠從MRt 3 PMC合同中多樣化，而對於土木部分的授予並沒有明確的進展。一個值得關注的積極催化劑是預計在2024年第四季度正式啓動另一個伊拉克項目，即價值53.5億美元的Naja-Karbala鐵路項目，預計總PMC和CSS費用約爲21100萬馬幣。
Reiterate Add with an unchanged TP of RM1.48
CGS is adjusting its FY24F/FY25F/FY26F EPS by -21%/+1%/+4% to factor in lower-than expected contribution from MRT 3 PMC but compensated by faster recognition of Baghdad metro coupled with adjustment in recognition of its existing orderbook.
重申增持，目標價維持不變，爲RM1.48
中國銀河正在調整其FY24F/FY25F/FY26F 每股收益，分別爲-21%/+1%/+4%，以考慮到來自MRt 3 PMC的低於預期的貢獻，但由於巴格達地鐵的快速確認和對現有訂單的確認調整而得到補償。
The blended GP margin assumptions for FY24F/FY25F/FY26F are 31%/28%/28%, which are deem conservative as GP margins for the past 10 quarters were 30-37%. CGS reiterates its Add rating for its capex-light business model and its positioning at the front of the construction value chain with an unchanged DCF-based TP of RM1.48 (WACC: 9.6%, TG: 4.5%, Rf 4%, COE of 11%). Rerating catalysts include receipt of the advance payment for its Baghdad metro contract and faster awards of MRT 3 and other projects while delays in these processes and foreign country risk present downside risks.
FY24F/FY25F/FY26F的綜合毛利率假設爲31%/28%/28%，這被認爲是保守的，因爲過去10個季度的毛利率爲30-37%。中國銀河重申其對資本支出輕的業務模型的增持評級，並且在施工價值鏈的前端定位，目標價維持不變，爲RM1.48（加權平均資本成本：9.6%，永續增長率：4.5%，無風險收益率：4%， COE 11%）。重評級催化劑包括獲得巴格達地鐵合同的預付款和MRt 3及其他項目的快速授予，而這些過程的延遲和外國風險則帶來下行風險。
