HSS ENGINEERS EYES OVERSEAS DEALS

Company now in stronger position to expand globally following RM270m bid for SMHB Engineering

HSS Engineers Bhd (HEB) is eyeing potential overseas engineering projects as it is now in a stronger position to do so following its RM270 million proposal to buy SMHB Engineering Sdn Bhd.

“One of the things lacking in the local industry is that we do not have the capital to compete effectively with international players.

“Now, with our scale and skills sets, we are far more strongly positioned to look, in the first instance, regionally in Asean before expanding to the Middle East and India. These are our target markets internationally,” said executive director Tan Sri Kuna Sittampalam.

HEB announced yesterday that it was buying the entire stake in SMHB for RM270 million.

The acquisition will pave the way for HEB to strengthen its engineering consulting space in the water infrastructure sector.

The deal entails RM162 million cash and HEB Group shares worth RM108 million.

The cash will be raised from a 50:50 combination of bank borrowings, and placement and rights issue.

Kuna said the enlarged entity would have a substantial combined order book of nearly RM740 million.

“The signing of the HOA (heads of agreement) unites two leading powerhouses of the engineering consultancies in the country.

The RM270 million purchase price is at an enterprise value over earnings before interest, tax, depreciation and amortisation (Ebitda) of 7.7 times.

SMHB has taken the lead role in various pivotal water sector projects locally, including Phases 1, 2 and 3 of the development of Sungai Selangor, the Pahang-Selangor raw water transfer project, and the strategic planning for water distribution in Selangor and Kuala Lumpur.

For the year ended April 30, last year, SMHB reported a net profit of RM25 million on revenue of RM93 million.

As a combined entity, HEB group revenue would increase to RM232 million from RM139 million, with Ebitda rising to RM58 million from RM23 million, and net profit to RM39 million from RM14 million.

The deal is expected to be completed early next year.