Results

• Eversendai’s 4QFY15 results came in with revenue of RM489.3m (+59% YoY, +4% QoQ) and core earnings of RM16.9m (+97% YoY, +195% QoQ).

• Full year FY15 core earnings of RM47.5m almost doubled YoY (+94%). Note that our derivation of core earnings removes forex gains of RM18m and -RM9.5m fair value loss on its share in Technics (19.5%).

Deviation

• FY15 earnings surpassed our forecast by 12% but were below consensus by -14%.

• The better than expected results was due to a stronger than expected 4Q which saw margin recovery with PBT margin doubling from 2.2% to 4.5%.

• Recall that 2Q and 3Q results were impacted by (i) Worli project in India being halted and (ii) accelerated cost incurred for Tg Bin.

Dividends

• A 0.5 sen dividend was declared (FY14: 1.25 sen)

Highlights

• Touching its previous high. YTD job wins have amounted to RM1.7bn (surpassing our full year target of RM1.6bn). As guided by management, job wins managed to hit its previous high which was last achieved in FY10. Its orderbook currently stands at RM1.7bn, implying cover ratio of 1x on FY15 revenue. While this ratio may appear thin, we are not entirely concerned given the fast turnaround nature of Eversendai’s jobs.

• Riding on the strong USD. Over 70% of Eversendai’s orderbook is located in the Middle East whose local currencies are pegged to the USD. While the USD may have weakened in Feb, the YTD average (i.e. Jan-Feb) is still higher by 19% YoY, which should continue to benefit Eversendai.

Risks

• Strengthening of the MYR (i.e. weakening of USD) would negatively impact its profits.

Forecasts

• While the earnings were above expectations, we keep our forecast unchanged pending takeaways from its analyst briefing this Thursday (3 March).

Rating

• Maintain BUY, TP: RM0.99
• Despite hiccups in 2Q and 3Q, the recent 4Q numbers sends a good signal that things are getting better with job wins returning to its previous high.

Valuation

• While there are no changes to our earnings forecast, we cut our SOP based TP from RM1.06 to RM0.99 (still applying a 20% discount) as we mark to market Eversendai’s stake in Technics.

Source: Hong Leong Investment Bank Research - 1 Mar 2016