News

Successfully secured various structural steel projects collectively worth ~RM152m in Qatar and India. Details of the projects are:

(1) RM78.7m Gabbro Terminal Expansion, Mesaieed, Qatar;

(2) RM16.3m Skylight Steel Package 2 of Mall of Qatar; and

(3) RM57.1m from Reliance Industries Ltd for J3 Project in Gujarat, India.

Comments

3rd major announcement win… The latest collection of contracts secured marks the third major announcement on contract wins by Eversendai. Hence, bringing YTD contracts win to RM903.5m, which represents ~90% of our annual order book replenishment assumption for the company.

It is a major improvement compared to only RM669m worth of projects secured for FY13.

Decent size... The latest orders are of significant size as it represents ~15.8% of FY13’s revenue.

Earnings visibility… Estimated outstanding order book has been lifted slightly to ~RM1.8bn, translating to 1.9x FY13’s revenue.

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 latest orders are part of our RM1bn annual order book replenishment assumption for the company.

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 Target Price of RM1.01 based on unchanged 10x FY15 earnings.

Source: Hong Leong Investment Bank Research- 19 Jun 2014