KUALA LUMPUR: Kenanga research maintained market perform on Hock Seng Lee Bhd with an unchanged target price of RM1.40 as its 1Q19 core net profit of RM14.1mil came within expectations.

In its earnings announcement yesterday, Hock Seng Lee's core net profit came in 7% higher year-on-year (y-o-y) on revenue growth of 11% depite a mild decline in pre-tax margin to 13%.

"The growth in revenue is driven by both of construction and property divisions, which grew 10% and 21%, respectively. 

"While the compression in margin stems from its construction division, which saw pre-tax margin falling to 10% (-2ppt) due to higher billings of lower margin jobs coupled with rising overhead costs," said Kenanga.

In its outlook, Kenanga said the overall construction pace for existing projects like Pan Borneo, Miri and Kuching Waste Water are progressing smoothly.

The research house expects higher construction billings in FY19 as its major ongoing projects move into more mature stages.

Hock Seng Lee's outstanding orderbook stands at about RM2.5bil, which offers three years' visibility.