• HLIB Institutional Research has a BUY rating on SENDAI with target price of RM0.98, or 33.3% upside. SENDAI’s s hare prices nosedived 56% from 52 -week high of RM1.10 (10 June 14) to a low of RM0.485 (12 Jan) amid concerns over falling contract flows from reduced capex (due to plunging oil prices), high start-up costs and margins squeeze from newly established O&G division and variation orders for its jobs in India and Qatar. However, following a strong turnaround in its 4Q14 results and robust jobs’ wins YTD, SEND AI’s share prices rallied to 2015’s high of RM0.835 (on 17 Mar and 21 Apr) before ending at RM0.735 yesterday, in line with recent market pullback.
• Targeting RM2bn new job wins in 2015. SENDAI has tendered for RM11.8bn worth of jobs, largely comprising of its usual bread and butter structural steel works for buildings. Geographically, 30% of these tenders are in Malaysia. By division, O&G tenders make up 25% of total bids, which is evenly split between Malaysia and the Middle East. In its 4Q14 inves tor’s briefing, management shared that it is targeting for RM2bn in new job wins this year. Should this be achieved, it would surpass its previous high of RM1.7bn in FY10. To recap, SENDAI had clinched robust jobs of RM1.1bn in 2014 and secured YTD orderbook replenishment totaled RM864m.
• Beneficiary of strong US$. The strong US dollar is another added booster for earnings as the bulk of its contracts come from the Middle East (more than 75% of its orderbook). Its contracts in the Middle East are denominated in their respective local currencies which in turn are pegged to the US dollar.
• Poised to retest RM0.835 after building a base near RM0.68 or lower Bollinger band. After hitting RM0.835, share price corrected 16.2% to a low of RM0.70 (on 6 May) before gradually trending upwards to end at RM0.735 yesterday. We see further upside amid Tweezer bottom formations on 5 & 6 May, supported by bottoming up of grossly oversold and daily oscillators (RSI, Slow Stochastics and MACD).
• Immediate upside targets are RM0.77 (200-d SMA) and RM0.835 (also long term downtrend line). A decisive breakout above RM0.835 will spur prices higher to retest our long term target price of RM0.89 (61.8% FR). Immediate supports are located at RM0.70 and RM0.68. Cut loss below RM0.67.

Source: Hong Leong Investment Bank Research - 15 May 2015