HEB Group 2Q22 Net Profit Ballooned to 147.9%, Proposes corporate exercises 

Engineering and project management consultant HSS Engineers’s net profit for the second quarter ended 30 June 2022 (2Q22) soared 147.9% to RM3.9 million from RM1.6 million a year ago, on favourable project mix from Project Management Consultancy (PMC) works for Phase 1 of Pan Borneo Highway Sabah project.

The remarkable bottomline performance was despite a marginal 2.9% reduction in 2Q22 revenue to RM37.9 million from RM39.0 million previously. In particular, contributions from the PMC segment catapulted 245.6% to RM12.8 million from RM3.7 million a year ago, which mitigated the lower revenue in the engineering services segment in line with project progress.

The similar product mix was also reflected in the first half ended 30 June 2022, where group net profit jumped 81.6% to RM6.4 million from RM3.6 million, despite revenue moderating to RM74.3 million compared to RM82.9 million previously.

As at 30 June 2022, HEB Group’s unbilled order book stood at RM529.4 million, providing earnings visibility over the next five years. This had yet to incorporate the RM997.4 million appointment of the HSS joint venture (formed by HSS Integrated Sdn Bhd and HSS Engineering Sdn Bhd) by MRT Lingkaran Sdn Bhd to undertake the PMC role for MRT Circle Line (MRT 3),
which will contribute to the Group from the third quarter of 2022 onwards till 2033.

“Our strong financial performance this quarter underscores our improving fundamentals, which positions us aptly for the coming quarters as we undertake major projects including the PMC works for MRT3 totalling nearly RM1.0 billlion. Having established our homegrown building blocks through the Independent Consulting Engineer roles in MRT 1 and MRT 2, HSS has both the expertise and track record to confidently project manage MRT 3. We are honoured to have been selected as the most technically competent in an open tender,” Tan Sri Ir. Kuna Sittampalam, Executive Vice Chairman of HSS Engineers Berhad said.

“One of the Government’s aspirations is for the MRT3 to be primarily spearheaded by local talent to the benefit of our local economy. We are aligned with the Government’s nation-building objectives to utilize and enhance local resources for MRT 3 as widely as possible to enable all to prosper in these very challenging times,” he said.

HEB Group also announced two corporate exercise proposals: a bonus issue of free three-year warrants on the basis of one warrant B for every three existing shares held by shareholders on an entitlement date to be determined later; as well as a private placement of up to 20% of the total number of issued shares.

Based on the enlarged number of up to 543.7 2million issued shares assuming the full conversion of 47.86 million existing Warrants A, the proposed bonus issue of warrants will entail the issuance of up to 181.24 million Warrants B on the basis of 1 Warrant B for every 3 HEB Shares, held by the entitled warrant holders.

The actual number of Warrants B to be issued pursuant to the proposed bonus issue of warrants will depend on the total number of issued shares (excluding treasury shares, if any) on the Warrants B Entitlement Date. Warrants B will be issued at no cost to entitled shareholders as a form of reward.

The exercise price of Warrant B has been fixed at RM 0.43 per Warrant B, representing a discount of approximately 14% based on the 5-day volume weighted average market price of HEB Shares up to and including the latest practicable date of 16 August 2022 of RM 0.50 per HEB share. Hence, the full exercise of Warrants B may potentially raise up to RM 77.93 million in proceeds within the three-year tenure for future working capital purposes.

Meanwhile, the proposed private placement entails the issuance of up to 20% of the total number of issued shares of HEB.

As at 16 August 2022, the total issued share capital of HEB was RM 254.29 million comprising 495.86 million HEB Shares. Under the maximum scenario, up to 108.74 million new HEB Shares (“Placement Share(s)”), representing approximately 20% of the enlarged number of issued shares of HEB, may be issued pursuant to the proposed private placement.

Based on the indicative issue price of RM 0.50 per Placement Share, the proposed private placement is expected to raise gross proceeds of up to RM 54.37 million under the maximum scenario. These proceeds would be utilised to partly or fully finance business expansion in the engineering support industry, working capital and defray expenses related to the corporate

The proposed bonus issue of 1-Warrant B for every 3 HEB Shares held is subject to approvals from shareholders at an Extraordinary General Meeting to be convened, alongside other regulatory authorities. The proposed private placement is conditional upon the completion of the proposed bonus issue of warrants. Barring unforeseen circumstances, the corporate exercises are targeted to be completed in the fourth quarter of 2022.

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