• HLIB Institutional Research has a BUY rating on SENDAI with target price of RM1.10, or 39.2% 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.
• More contracts to be awarded in the near term. The stock offers strong earnings CAGR of about 44% from FY14-17 at undemanding valuation of 0.62x P/BV (peers ’ 0.95x). Moreover, Sendai’s orderbook currently s tood 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 soon as they are in the final stages of approval from the client.
• Building base above 200-d SMA. 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 RM0.79 yesterday. Near term outlook has turned more positive, supported by trending above the long term bullish 200-d SMA trend line (now at RM0.75) since early Sep and staging a downtrend line breakout yesterday.
• Traders may go long here with near term supports of RM0.77 (10-d SMA) and RM0.75. Upside targets are situated at RM0.825 (19 Sep high) and RM0.855 (50% FR). A decisive breakout above RM0.85 will spur prices further to our long term objective at RM0.96 (76.4% FR). Stop loss at RM0.72.

Source: Hong Leong Investment Bank Research - 6 Oct 2015