HLBank Research Highlights
Eversendai - Stay cautious despite strong job wins
News
- Strong on job wins. Eversendai announced that it has recently secured RM558m worth of contracts. These consist of RM357m in India (Piramal Revanta project, residential development, start-up complex and office building) and RM201m in the Middle East (museum, office tower and metro station).
Comments
- Orderbook at a high... With these recent contracts, YTD job wins now total RM1.3bn. Based on its orderbook of RM2.4bn as of end FY16, coupled with a burn rate of RM450m in 1Q17, we estimate Eversendai’s orderbook to stand at RM3.2bn. This translates to a cover ratio of 2x on FY16 revenue which is rather strong considering the relatively fast track nature of its structural steel jobs. Management is gunning for RM2.5bn in new job wins for FY17 vs our more conservative target of RM2bn.
- ...but cautious on delivery. Whilst we acknowledge the strong job wins that Eversendai has amassed over the past 2 years, we remain cautious on what extent this will translate into a decent level of earnings. To illustrate, Eversendai recorded razor thin net margins of 2.4-2.5% for FY14-15 and a core loss (RM160m) in FY16.
- O&G continues to drag. We understand that although its bread and butter operations in the Middle East are doing well, the O&G division remains in the red. Delivery of the 2 liftboats (an RPT contract with its holding-co Vahana) which was initially scheduled for 1Q17 and 3Q17 has now been delayed to 2H17 and 1H18 respectively. However, we take some comfort on the fact that Vahana has secured financing for 1 of the 2 liftboats which should alleviate payment risk to Eversendai.
Risks
- Payment risk on the 2 nd liftboat is our primary concern.
Forecasts
- Although YTD job wins of RM1.3bn is still within our full year target of RM2bn, we revise FY17-18 earnings downwards by 43% and 31% respectively. This stems from our expectations of higher finance cost as debt levels continues to increase (doubling since FY13 to RM1.2bn as of FY16).
Rating
Downgrade to SELL, TP: RM0.58
- In our view, Eversendai’s steep share price run (68% since end Feb) cannot be justified by its earnings. We feel that investors are pricing in too much of an earnings recovery (from a loss in FY16) without taking into account the risk associated with its erratic earnings delivery. Downgrade from Hold to SELL given strong share price run.
- 1QFY17 results are due to be released on 25 May.
Valuation
- No change to our TP of RM0.58 which is based on a 50% discount to its FY17 BV. We reckon that a BV based valuation metric is fair given its track record of erratic earnings delivery
Source: Hong Leong Investment Bank Research - 17 May 2017
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Discussions
Be the first to like this. Showing 38 of 38 comments
Yes. I always have reservation about their execution
Strong order book strong revenue, but always loss making
2017-05-17 16:48
And they have a very expensive oil and gas vessel near completion. That vessel has yet to secure a charterer
Potential huge impairment ahead
2017-05-17 16:49
More serious than that. Not sell into strength, it should be "give it to the buyers at whatever price"
2017-05-17 16:57
This hong Leong analyst very good. The past few days must be Hong Leong clients selling
2017-05-17 16:59
High order book but thin net margins ..even make lost ... think will drop further ...GG
2017-05-17 17:05
yeah just like the way you step on Kesm.
d by Icon8888 > May 17, 2017 04:58 PM | Report Abuse
Run before KYY offload. 兵败如山倒
2017-05-17 17:10
if KYY loses money....it is his money....no JJPTR money there.
all things considered, I think Sendai will produce a rather good set of results this coming quarter......
In fact, now that I know why the share came down , I am interested to buy.
worse is only when don't know why share come down.......................
2017-05-17 17:26
what are analysts?
analysts are also just tail wagging the dog.
they have no privileged information about the margins and impairments.
2017-05-17 17:29
so scared of a company with record business?
how to play share market?
margin?
well...margins automatically get better with reputation and track record...............and a more favorable steel prices presently..........hahahahaha
this analysts must be another icon member in i3....all these brainless young punks.
Icon8888 > May 17, 2017 05:30 PM | Report Abuse
yes, the analyst this time is trying to wag the manmy dog
2017-05-17 17:51
High risk to invest in this counter, as there might be impairment again. Too many uncertainties, poor execution
2017-05-17 18:02
impairments in Q1?
that is rather naive
RicheHo > May 17, 2017 06:02 PM | Report Abuse
High risk to invest in this counter,
2017-05-17 18:05
Ok lah everybody don't argue.
I will buy some to support Uncle KYY if it drops to 0.75, the previous resistance level.
2017-05-17 18:21
Icon
What is the cause of your obsession about Kyy and stockman?
I can have a side bet with you........when results come out, this share will be higher than 88 sen......if I win, you stop this Kyy / stockman nonsense.
2017-05-17 18:47
I have no interest at KYY at all
I am just trying to teach Mr. PLP some manners
2017-05-17 19:26
I want to teach the running dog to not simply bite people when it's master not around
2017-05-17 19:39
FU icon
stock market is about a bet on the future.
I have my money that says Sendai 's future is brighter than its past.
what manners, what plp you want?
I actually think that is how to make money from the stock market....by betting on a turnaround play and proven right later.
2017-05-17 19:40
that idiotic HL analyst, I can bet my last dollar is a visitor to i3. ...and gets influenced by you.
All the current is in favor of the Company...much easier to flow with the current and for Sendai to show improvements than for it to continue to bleed.
2017-05-17 19:43
manmy, PLP me and I give you few bucks to buy KFC, if you are so desperate for money until you sacrifice your character and dignity
2017-05-17 19:50
I think stock market very easy one...at least much easier than people think.
It is only difficult when have to rely on other people opinion, and paid teachers.
Stock market...you place a bet, know why you bet, what you want to bet and see your results come true. In this case, I bet Sendai future is brighter than its past....and $ 2 is not impossible as long as Sendai keep delivering results.
2017-05-17 19:59
I think stock market very easy one...at least much easier than people think.
It is only difficult when have to rely on other people opinion, and paid teachers.
Stock market...you place a bet, know why you bet, what you want to bet and see your results come true. In this case, I bet Sendai future is brighter than its past....and $ 2 is not impossible as long as Sendai keep delivering results.
It is only complicated by people who don't know what they are doing, some don't even know why they are betting.
some betting because they see some thing in some lines in some charts, some betting because they see good results for one quarter and multiply by 4..(.icon favorite trick ).....
the proper way to bet is to see a brighter future than its recent past.
2017-05-17 20:09
Secure construction contracts not means it will be definitely making profit as unforeseen condition especially overseas contract where expose to currency exchange risk.
2017-05-17 20:45
PLP knows master is going to read this article so he now damn good behaviour. Real slave
2017-05-17 21:24
I have boiled down the magic formula for stock market success.....the proper way to bet is to see a brighter future than its recent past.
its about the vision and the vision coming true , make money.
2017-05-17 21:29
and if you need everybody to agree...there is no profits to be make.
by yewniengwei2693 > May 17, 2017 08:45 PM | Report Abuse
Secure construction contracts not means it will be definitely making profit as unforeseen condition especially overseas contract where expose to currency exchange risk.
2017-05-17 21:31
700 million shares, $ 2 billion turnover people so scared......
we shall see, wouldn't we?
2017-05-18 01:55
So hard sell by stockmanmy, all he knows is to follow his master. All dynamic rubbish are remained as rubbish!
2017-05-18 02:50
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2017-05-17 16:47