Hock Seng Lee’s 1Q net profit rises 20% to RM9.09m, underpinned by construction segment

KUALA LUMPUR (May 20): Hock Seng Lee Bhd’s (HSL) net profit for the first quarter ended March 31, 2021 (1QFY21) rose 20.38% to RM9.09 million, from RM7.55 million a year ago, underpinned mainly by the construction segment.

The group’s revenue also grew 41.91% to RM159.5 million, from RM112.4 million a year ago, its filing to Bursa Malaysia showed.

The group said the construction segment contributed RM141.95 million (89%) whilst the property development segment registered a contribution of RM17.29 million (11%) to the group’s revenue during the quarter.

Its construction segment's 1QFY21 revenue increased to RM141.95 million from RM101.25 million a year earlier, while its net profit before tax rose to RM9.26 million from RM6.86 million.

Meanwhile, the revenue for its property development segment rose to RM17.29 million from RM11.15 million a year earlier. Net profit before tax was higher at RM3.4 million compared with RM3.27 million previously.

The group did not declare any dividend for the latest quarter.

In a separate statement, the group said work has picked up compared to the fourth quarter of 2020, but the momentum was interrupted by the reimposition of new variations of movement control orders in many parts of Malaysia and Sarawak.

Its managing director Datuk Paul Yu Chee Hoe noted issues from 2020 arising from Covid-19 have not dissipated.

“Crucially, these include acute labour shortages, travel restrictions and disruptions to material supply chains. For projects under HSL's current order book of over RM1.8 billion, margins are squeezed as contractors are forced to accept higher costs. The same scenario is repeated in property development,” he said.

Industry-wide, he said the construction firms are absorbing substantially higher costs of construction materials.

“Steel, for instance, had gone up 50% in May this year from a year ago,” he noted.

According to him, the sharp rise is brought about by the worldwide shortage of raw materials due to the pandemic coupled with the regional resumption of business activities, particularly in mammoth economies like China and the US, where the new administration is spearheading a once-in-a-generation infrastructure boom.

Nevertheless, he said, HSL completed a substantial amount of projects in 2020.

“The mega project of Miri Wastewater is at its tail-end, while more than two-thirds of the Package Seven for the Pan Borneo Highway is completed,” he said.

Going forward, he said, HSL’s challenge ahead is to work on replenishing its order book, while trying hard to find more efficiencies for existing projects with thinning margins.

For the property segment, he said, demand continues to be soft, showing little signs of improvements, especially in the middle segment.

At noon break, HSL rose 0.5 sen or 0.52% to 97 sen, valuing the group at RM562.28 million.

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