• HLIB Institutional Research has a BUY rating on SENDAI with target price of RM1.55, or 70.3% upside. Following Sendai’s RM250m new s tructural s teel contracts in India, Malaysia and the UAE, its new job wins have totaled RM1.1bn YTD. Backed by its outstanding tenderbook of RM23bn, management expects new job wins to surpass its previous high of RM1.7bn achieved in FY10 (vs . HLIB’s cons ervative R M1.4bn target with potential upside bias given the encouraging momentum of new job wins.).
• We estimate that these new jobs bring its orderbook level to an all -time high RM2.2bn, translating to a cover ratio of 2.2x (another record high) vis -à-vis its historical range of 1.1-1.6x. This provides much clarity to Sendai’s earnings visibility.
• Beneficiary of stronger US$. US dollar has strengthened 20% against the ringgit since late Aug 2014. Sendai is a beneficiary of this as 76% of its orderbook comes from the Middle East. Its contracts in the Middle East are denominated in their respective local currencies which in turn are pegged to the greenback.

• Uptrend intact. The stock has been trading within the medium term uptrend channel since the RM0.485 low on 12 Jan. Following a 13.2% correction from YTD high of RM0.98 on 3 July to a low of RM0.85 yesterday, the strong 4% closing to RM0.91 and formation of long white candle could push prices above RM0.98 and RM1.00 upper resistance trend line, respectively.
• A decisive breakout above RM1.00 will lift prices higher towards RM1.05 (R2) and our long term objective target at RM1.13, respectively. Immediate supports are located at RM0.87 (hourly lower Bollinger band) and RM0.855 (30-d SMA). Cut loss below RM0.84.

Source: Hong Leong Investment Bank Research - 10 Jul 2015