HSS looks to RE and the world 

HSS Engineers Bhd is moving away from its asset-light beginning and diversifying into renewable energy (RE) as an asset owner for recurring income.

Under its HEB 2030 strategy, the company plans to pivot from a traditional project management consultant (PMC) role to a diversified infrastructure solutions platform.

It plans to leverage on technology for higher margin services, recurring income and renewed push to expand beyond Malaysia.

HSS co-founder and executive vice chairman Tan Sri Kuna Sittampalam expects the growth plan under the HEB 2030 strategy to show results as soon as this financial year ending Dec 31, 2026 (FY26) and going into FY27.

The RE projects the company has in hand are a 29.99MW solar photovoltaic plant in Kedah and a joint-venture 95MW plant in Perak. Kuna says these projects will contribute recurring income to the company in the next two years.

The company is also planning to bid for 100MW of RE projects under Malaysia's large-scale solar 6 (LSS6) programme.

Besides the RE venture, the company is making progress in securing data centre (DC) projects as a PMC, which remains the core of its engineering services, and from there, to leverage on DC demand for water and power infrastructure to offer the same services.

PMC services remain the most important contributor to total revenue, as the company’s latest quarterly financial report shows.

For the first quarter ended March 31, 2026 (1Q26), PMC services contributed RM21.3mil or 46.2% to total revenue.

For FY25, PMC services contributed RM103.2mil or 53.6% to the company’s revenue.

These services still make up four-fifths of the order book, which totals RM2.1bil as of 1Q26.

Kuna firmly believes that the HEB 2030 plan, conceived last year and formally adopted into the company’s growth framework, will show benefits in terms of financial performance and give it a competitive edge amid global development trends in technology and infrastructure demand.

He is hesitant in commenting on what the trajectory for financial performance will be under the plan but credits initiatives taken last year as having supported the bottom line and boosted the margins.

“We want it to move northwards. What the trajectory will be I cannot say for now, but the timeline will come under the HEB 2030 plan,” Kuna says.

For 1Q26, net profit more than doubled compared with 1Q25 but revenue came in 10.7% lower.

Analysts are divided over the company’s outlook this year but have maintained their recommendations, with one “add” call and two “buy” calls in reports released last month.

The company’s FY25 financial performance did not meet market expectations as net profit came in 46.6% lower compared with FY24 on revenue that grew 9.7%. Margins did improve but higher operational costs and a legal claim provision was a drag on profitability.

In a move supportive of the growth plan, the company decided not to declare a dividend for FY25 despite remaining profitable. Instead, the company chose to reinvest RM39mil into four growth priority areas – of which RM24mil will go into RE, RM10mil for expansion abroad, RM5mil for digital transformation and a small amount into strategic partnerships and capabilities.

“We are choosing to compound, rather than distribute, capital for one year because the opportunities before us are exceptional,” Kuna explains, adding that the reinvestments into high-growth and recurring-income businesses will build long-term value for shareholders compared to a one-year dividend distribution.

Kuna stresses that the decision was made from a position of financial strength as the company maintains a healthy balance sheet with a net gearing of 0.18 times.

However, delayed milestone payments from the Baghdad Metro project, in which the company acts as a PMC and project supervisor in a 50:50 joint venture, and the delayed roll out of the mass rapid transit 3 (MRT3) project in Malaysia, have weakened the company’s cash position, leading to an increased reliance on short-term financing.

Investor sentiment over the Baghdad Metro project has contributed to the share price underperformance.

Kuna explains that from a payment perspective, the company has achieved a significant milestone.

"The first payment has already been transferred by Amanat Baghdad's bank to the Trade Bank of Iraq as part of the onward payment process. The remaining letter of credit procedures are progressing, although regional geopolitical developments have resulted in a slower timeline than originally anticipated," he says.

"While the process has taken longer than expected, the completion of this milestone provides greater visibility on payment recovery and demonstrates continued progress toward resolving outstanding receivables," Kuna adds.

“We have nothing to hide, it's bona fide work and we believe this will be cleared in a month,” he says. The company has taken the step of not recognising the revenue contribution from the project in FY26.

The HEB 2030 growth plan aims to diversify the project base as well as markets in which the company operates in, as nine-tenths of revenue is derived from Malaysia currently.

While its order book stood at RM2.1bil, two of the projects account for some three quarters of the amount – the RM940mil MRT3 and RM633.7mil Baghdad Metro projects.

The relationship with foreign partners, Kuna says, is important in securing foreign projects.

He gives the example of working with Japanese companies, where the company started small but has now taken over the lead PMC role.

“These are beginning to bear fruit, I mean, we’re already seeing revenue for the last four years, but I think it will grow more,” he adds.

Kuna is counting the company’s partnership with Adani Infra (India) Ltd, with which HSS signed a memorandum of understanding in March.

“We’re happy to say that we’ve started on one project, although it’s a small but it’s a move in the right direction and I think this can grow,” he says.

Most of Adani’s projects are in India and span from transportation and logistics infrastructure to RE as well as DCs and water.

Adani Infra has ambitions to roll out US$10bil a year in projects for the next 10 years.

“Even if we get a small part of it, it will be sizeable for us and then I think India could be the largest contributor to total revenue,” he says.

Among targets, the company is looking to grow overseas revenue contribution to 30% of total revenue by 2027 from about 10% currently.

The company has a RM300mil order book replenishment target for FY26, which is the same target as FY25.

Kuna says this is a conservative target and not the ceiling. He points to the healthy headstart as the company has secured RM90mil as at end-May.

Excluding the MRT3 and Baghdad Metro projects, it still has an active orderbook of RM525mil.

He says that RM150mil to RM250mil of imminent project awards have not been included in the target.

He feels that HSS is not a “two-project story” as the market narrative paints it to be, as stripping out the two largest projects, the company has more than 200 projects, reducing concentration risk and strengthening earnings resilience.