News

• A new high for job wins. Eversendai announced that it has secured several new contracts in the month of Sept. These include (i) The Royal Atlantis in Dubai, (ii) Al Wakrah Bypass - ITS Gantries and Viva Bhahriya in Qatar, (iii) Rupa Renaissance, Mumbai and Ameerpet & MGBS stations, Hyderabad in India, (iv) Sinohydro-Jimah Project in Malaysia and (v) New State Courts in Singapore.

Comments

• Hitting a new high. With these contracts in the bag, Eversendai’s YTD job wins currently stands at RM1.8bn. This has already surpassed its previous full year high of RM1.7bn achieved in FY15. Its orderbook currently stands at record RM2.5bn implying 1.4x cover on FY15 revenue. In terms of its job flow pipeline, Eversendai is tendering for RM21bn worth of jobs.

• Liftboats still a concern. On a separate matter, Eversendai is currently constructing 2 liftboats worth USD180m for its holding-co, Vahana via an RPT. Completion on the 2 liftboats stands at 85% and 55% with deliveries scheduled for 1Q17 and 3Q17. Under the contract terms, a 20% upfront payment has already been made to Eversendai with the balance 80% upon delivery. The management of Vahana guides that it is in the midst of negotiating a JV agreement with some European parties to have the liftboats chartered out. Until this has been finalised, we remain concerned on the potential payment risk should its financing not materialise.

Risks

• Payment risk on the 2 liftboats is our primary concern.

Forecasts

• While YTD job wins of RM1.8bn has surpassed our full year target of RM1.5bn, we are taking the cautious stance and keeping our earnings forecast unchanged. This is in view of Eversendai’s rather inconsistent earnings delivery from quarter to quarter.

Rating

Maintain BUY, TP: RM0.66

• Despite lingering concerns on its liftboat contract, from a core earnings standpoint, its recovery appears to be panning out well coupled with robust job wins. The stock also trades at an attractive P/E of 6x and 5.3x on FY16-17 earnings with current P/B at 0.39x.

• In our (rather extreme) worst case scenario whereby Eversendai has to write off the entire receivables on the liftboats, we estimate that it’s BV per share would fall from RM1.27 to RM0.53, still above its current share price.

Valuation

• TP of RM0.66 is unchanged based on 8x P/E (20% below its normalised mean) on FY16 earnings

Source: Hong Leong Investment Bank Research - 25 Oct 2016