• HLIB Institutional Research has a BUY rating on SENDAI with target price of RM1.10, or 46.7% upside. In its 2Q15 results briefing, management indicated that the weak 2Q results was due to: (i) suspension of works for the Worli project in India as the client faced approval issues from local authorities, resulting in RM8m additional cost incurred; and (ii) acceleration of works for the Tg Bin project in Malaysia costing RM6m additional expenses. In both cases, management guided that it will be claiming for additional costs incurred from the clients and these pressures should not persist into 2H15.
• Contract wins boon for 2015? Sendai’s orderbook currently stands at RM1.8bn, translating to 1.7x cover on FY14 revenue. YTD job wins have totaled RM1.1bn and management is hopeful that FY15 will be a record year for job wins, even surpassing its previous record in FY10 at RM1.7bn. We were guided that there are a few sizable jobs that could be awarded very soon as they are in the final stages of approval from the client. Overall, management is unfazed by the bearish O&G sector and currency volatility, as the group still expects to secure more contracts from Middle East clients. We understand that the group has a tenderbook of over RM11bn (out of RM17bn) coming from the Middle East region.

• Riding on the strong greenback. YTD, Ringgit had depreciated 24% against US$ to RM4.3393 yesterday. Overall, Sendai is a net beneficiary of this as 73% of its orderbook comes from the Middle East whose local currencies are also pegged to the USD.
• Poised to retest RM0.81-0.95 zones. From YTD high of RM1.05 on 21 July, SENDAI’s share prices tumbled 37% to a low of RM0.66 on 2 Sep before closing at RM0.75 yesterday, breaking above the short term downtrend resistance and supported by robust volume of 5.7m shares (vs. average 1- month: 1.4m; 3-month: 2.2m). This breakout could send prices higher in coming days.
• MACD has staged a golden crossover while RSI has turned upwards again. Traders may go long here with a stop placed below RM0.65. Upside targets are situated at RM0.81 (38.2% FR) and RM0.87 (50-d SMA). A decisive breakout above RM0.87 will spur prices further to our long term objective at RM0.95 (76.4% FR).

Source: Hong Leong Investment Bank Research - 9 Sep 2015