News

• Receives Saudi Aramco certification... Eversendai announced that it has been accorded the Saudi Aramco 9com certification. This enables Eversendai to undertake projects by Saudi Aramco which are only open to prequalified and approved companies that fulfil the latter’s stringent requirements.

• ...and contract award. It was also awarded an offshore fabrication job from Saudi Aramco, making it the first Malaysian company to undertake such a project. Including other contracts such as (i) 13 gantry structures in Doha, (ii) mixed-use development in Doha, (iii) bank HQ in Dubai and (iv) jackets for Saipem in Saudi Arabia, Eversendai announced a total of RM180m in new jobs secured.

Comments

• Opening a huge market. The certification is a positive milestone for Eversendai’s O&G division as its fabrication yard in Ras Al Kaimah becomes a prequalified vendor for fabrication and construction of offshore platforms and jackets for Saudi Aramco. Saudi Aramco is projected to spend USD300bn over the next 10 years and has awarded USD5bn from 2016 to-date.

• New job wins coming in strong. With the RM180m worth of contracts announced, this brings Eversendai’s YTD job wins to RM1.6bn. Management is optimistic for new job wins in FY17 to surpass its previous high of RM1.8bn achieved last year, potentially hitting RM2-2.5bn. With these new contracts, Eversendai’s orderbook now stands at high of RM2.3bn, translating to a cover of 1.5x on FY16 revenue.

Risks

• While job wins have been strong, execution remains a key risk to watch out for.

Forecasts

• As YTD job wins of RM1.6bn are still within our full year assumption of RM2bn, we leave our forecast unchanged.

Rating

Maintain HOLD, TP: RM1.01

• While Eversendai’s earnings recovery is expected to be strong (coming off a low base), we feel that this has already been reflected in its share price which has appreciated 73% YTD.

Valuation

• TP of RM1.01 is based on 12x P/E target applied to FY18 earnings.

Source: Hong Leong Investment Bank Research - 7 Nov 2017