Period  4Q12 / FY12

Actual vs. Expectations  The reported FY12 net profit of RM115.4m came in within expectations, accounting for 96% and 98% of ours and the street's estimates of RM120.0m and RM118.3m respectively.

Dividends  A dividend of 2 sen was declared, which was above expectations.

Key Results Highlights QoQ, the 4Q12 earnings grew 26% to RM32.1m underpinned by a 14% growth in revenue and a gross margin expansion of 12ppt to 30% mainly driven by projects from the Middle East like King Abdullah Petroleum Studies & Research Center (KAPSARC) and CMA Towers in Saudi Arabia, Qatar Faculty of Islamic Studies, National Museum of Qatar and Qatar Foundation Headquarter in Qatar, Al-Jalila Children's Specialty Hospital in Dubai, Yas Mall Phase 2 in Abu Dhabi and the Salalah Airport expansion in Oman.

 YoY, the 4Q12 pretax profit increased by 30% to RM46.1m due to lower operating and administrative expenses and a higher other income from the sales of scrap and also a reversal of the previous financial year's provision for contract claims. However, the net profit slipped 12% due to a higher effective tax rate of 26.6%, which increased by 24.3ppt.

 YoY, the full year FY12 earnings of RM115.4m decreased marginally by 3.4% on a weaker construction revenue from the Middle East (-21%) and a higher effective tax rate of 11.3% despite the significant improvement in earnings from India and Malaysia.

Outlook  The current order book stands at RM1.6b, which will provide at least another two years of earnings visibility for the group. We believe that with its recent investment in Technics Oil & Gas, Eversendai will be able to leverage on the former's strength and expertise to bid for more Oil & Gas related jobs.

Change to Forecasts  No changes to our FY13-FY14 forecast at this juncture.

Rating   Maintain OUTPERFORM

 We are maintaining our OUTPERFROM rating given the attractive upside of 31% to our Target Price of RM1.51.

Valuation  We are maintaining our Target Price at RM1.51 based on an unchanged 8.0x PER on our FY13 EPS.

Risks  Higher raw material costs and delays in ETP-based project awards.

Source: Kenanga