Drones to propel HSS Engineers’ growth

IN the age of artificial intelligence (AI), a new area of growth for HSS Engineers Bhd (HSSE) comes from the provision of drone and robotic services.

The use of industrial-grade drones is on the rise globally, and the trend is expected to catch on rapidly in this part of the world.

There is demand for drones to enhance efficiencies in various industries and increasingly for non-commercial purposes, such as surveillance.

HSSE’s 70%-owned subsidiary HSS Propick Technologies Sdn Bhd is involved in providing drone-driven solutions and IT consulting for the agriculture and engineering sectors.

HSS Propick, which was set up recently, is anticipated to grow quickly as the global delivery-drones market is projected to be worth in excess of US$5bil by 2030, says HSSE’s executive vice-chairman and acting group chief executive officer, Tan Sri Kuna Sittampalam.

This organic expansion through HSS Propick is expected to set the group on a path to becoming a significant solutions provider in the unmanned aerial vehicles (UAVs) industry in South-East Asia.

“HSS Propick has developed drone-driven solutions that significantly lower operating costs while enhancing project delivery.

“The subsidiary is part of our fast-growing digital transformation vertical, which is making significant inroads with its wide array of AI drone-driven solutions for use in the telecommunications, construction, and plantation sectors,” Kuna tells StarBiz 7.

For a start, Kuna says HSS Propick will soon engage in a joint development initiative with agri-tech company IRGA Sdn Bhd to develop a range of solutions in the autonomous-technology sector aimed at boosting plantation productivity.

Meanwhile, the continued focus on infrastructure development in the region also bodes well for HSSE.

These include projects such as the upgrading of the water supply and national piping network, railways and roads.

Ongoing project flows have resulted in the group recording an order book at a historical high of RM2.1bil, which is expected to last the next eight years.

“We are set for steady growth in the financial year ending Dec 31, 2025 (FY25), buoyed by our successful expansion strategy and diversified project portfolio.

“We will replenish and further expand our order book by tendering for local and overseas projects, both in emerging growth areas such as data centres and renewable energy, as well as our traditional strongholds of rail, highways, ports and water infrastructure,” he says.

Presently, HSSE is actively bidding for RM483mil worth of projects with a historical success rate of more than 50%.

Moving forward, the group foresees more opportunities in overseas markets, particularly in Asia, supported by its recently inked joint venture with Opus International (M) Bhd to explore infrastructure-related projects in South-East Asia and the Middle East, as well as its strategic partnerships with five leading Japanese engineering consultancies.

Apart from this, it is also pursuing further opportunities in data centres as part of its diversification strategy.

“We expect to see further growth in the data-centre sector, benefiting from a surge in data-centre investments in Malaysia on the back of supportive government policies and reliable energy infrastructure,” Kuna says.

“With two new data-centre contracts secured this year, we are now providing project management and engineering design services for seven data centres in Selangor and Johor, with a combined contract value of RM60mil.

“We are also tendering for additional data-centre contracts worth RM30mil,” he adds.

In the renewable-energy space, HSSE plans to bolster its recurring and long-term income-based contracts, with a particular focus on solar power.

The group is currently developing a 29.99-megawatt solar photovoltaic plant in Kuala Muda, Kedah, slated for completion by end-2025.

“We are targeting healthy increases in both revenue and profit in FY25, driven by ongoing foreign and domestic projects and confidence in securing additional wins. In Malaysia, the RM120bil in total public investment for development allocated under Budget 2025 also augurs well for our prospects,” he says.

Kuna is also optimistic about its Sarawak-based subsidiary, HSS Alliance (Sarawak) Sdn Bhd, which secured its first contract in 2024 ‑ a road project in Serian town.

“Sarawak will also be a key growth area for the group, as HSS Alliance capitalises on the immense infrastructure opportunities generated by the state’s rapidly growing economy,” Kuna says.

The group also anticipates that the recent water tariff hikes in Peninsular Malaysia and Labuan will lead to further capital works for water supply system upgrades in the coming years.

Growth is also poised to be strong in Asia, with the group targeting 25% of revenue from overseas projects by 2027.

“We secured new wins this year in Iraq and Cambodia, complementing ongoing projects in Indonesia, the Philippines, and Bangladesh,” he says.

On another matter, Kuna explains the group’s recent negative cash flow of RM20.78mil as of Sept 30, 2024 is not a concern and will normalise soon.

“The negative cash flow is mainly due to our expanded order book, as multiple new projects have increased our working-capital needs.

“We anticipate returning to a positive cash flow in line with project progress,” he says.

“The negative cash flow will not impact dividend payments.

“We remain committed to our policy of paying dividends equivalent to at least 30% of annual net profit,” Kuna adds.

In its third quarter ended Sept 30, 2024, HSSE recorded 40% year-on-year growth in net profit to RM7.23mil, on the back of a 6.3% increase in revenue to RM50.37mil.