News

The Malaysian Reserve reported that Eversendai has secured various contracts collectively worth RM80m in the Middle East and India.

Comments

Contract details… Among the significant contracts secured in the Middle East is RM32.8m for Qatar Foundation Research and Development Complex in Doha and RM24.3m for Masdar Headquarters multi-use complex in Abu Dhabi. The major India contracts secured are RM9.3m World One King Tower in Mumbai and RM5.8m Signature Tower TCS Siruseri project in Chennai.

RM522.7m secured… YTD, we estimate that Eversendai has secured RM522.7m worth of contracts, making up 52% of our RM1bn order book replenishment assumption for FY13.

1 sen/share… Assuming a net profit margin of 10%, the collective projects secured translates to 1 sen/share for Eversendai.

Earnings visibility… Estimated outstanding order book of ~RM1.57bn, translating to 1.5x FY12’s revenue and 1.3x order book-to-market cap ratio.

Risks

Execution risk; Regulatory and political risk; Rising raw material prices; Unexpected downturn in the construction cycle; and Sharp fluctuation in forex.

Forecasts

Unchanged as the orders are already part of our RM1bn order book replenishment assumption for FY13.

Rating

BUY

Despite the shortfall in earnings growth, we continue to favour Eversendai’s niche in complex structural steel works and prudent management. We believe that the business development activities will yield positive results. Hence, we are maintaining our BUY call in view positive catalyst from potential O&G contract wins and structural steel works from its associate, Vahana.

Valuation

Maintain TP of RM1.75 based on unchanged 10x average FY13-14 earnings.

Source: Hong Leong Investment Bank Research - 23 Aug 2013