Results 

FY13 core PATAMI (after total EI adjustment of RM14.5m) fell by 62% to RM45.5m (5.88 sen/share), missing estimates by making up 72% and 74% of ours and consensus estimates respectively.

Deviations

Due to slower construction billings and lack of new contract wins.

Dividends

Net dividend of 1 sen/share declared. Payment date to be determined during AGM.

Highlights

4Q review… 4Q revenue fell by 13% YoY, but inched up slightly by 1% QoQ to RM238.3m. The weak revenue was mainly due to the lack of new contract wins over the past 3 years whereby Eversendai has only secured RM669m worth of projects in FY13 and RM923.9m in FY12, which is below its RM1.5bn annual order book replenishment target.

During the quarter, the company also incurred RM26.2m impairment on their investment in Singapore-listed Technics O&G. Overall, although 4Q core earnings of RM6.5m (0.84 sen/share) rebounded from 3Q, the sum is small compared to an average quarterly earnings of RM20m-35m.

FY13 review… Revenue shrank by 6% to RM965.1m, due to poor progress billings for its overseas project. Overall, due to higher expenses, core earnings fell by 62% to RM45.5m (5.88 sen/share).

Risks

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

Forecasts

Unchanged, subject to revision with downward bias post analyst briefing.

Rating

HOLD

Too much expectation for earnings growth and contract flows have been priced in Eversendai’s share price and it will take earnings recovery in the subsequent quarters to regain back investors’ confidence. Hence, we are maintaining our HOLD call on the company until signs of improvement.

Valuation

Maintain TP at RM1.28 based on unchanged 10x FY14 earnings. Subject to revision post analyst briefing.

Source: Hong Leong Investment Bank Research - 28 Feb 2014