• Bullish YTD orderbook of RM2.5bn. In a press statement yesterday, Sendai announced that it had secured contracts worth RM1.8bn YTD, with current orderbook and tenderbook standing at RM2.5bn and RM20.8bn, respectively. Amongst the new projects secured in Sep 16 are The Royal Atlantis in Dubai; Al Wakrah Bypass – ITS Gantries and Viva Bhahriya in Qatar; Rupa Renaissance, Mumbai and Ameerpet & MGBS Stations, Hyderabad in India; Sinohydro-Jimah Project: Steam Turbine & Center Control building in Malaysia and New State Courts in Singapore. The current orderbook translates to a cover ratio of 1.6x on FY15 revenue, which would provide earnings visibility to the group for the coming 2 years.
• HLIB institutional Research remains upbeat on SENDAI with a TP of RM0.66 (+33.3% upside). Following the positive press statement, Sendai’s share prices rose 4.2% to RM0.495 with a total 6.2m shares transacted (3.1x higher than 1M average of 2.1m shares). We see limited downside risks as the stock is trading at undemanding P/E of 5.3x FY17 (vs 10-year average 19x) and 0.31x FY17 P/B (about 9% lower than its 10-year historical low of 0.34x). We believe such valuations have priced in most of the negatives and provided sufficient margin of safety to cushion further sharp share price decline.
• The downtrend resistance breakout in daily chart and the rounding bottom pattern in weekly chart could signal more upside ahead. A decisive close above RM0.535 will spur prices higher to RM0.55 (50% FR) before reaching our LT target at RM0.60 (200-d SMA). Major supports are near RM0.475 (20- d SMA) and RM0.465 (50-d SMA). Cut loss at RM0.455.

Source: Hong Leong Investment Bank Research - 25 Oct 2016