Period 1QFY13

Actual vs. Expectations   The reported 1QFY13 net profit of RM22.7m came in below expectations, making up 16% and 18% of ours and the street’s estimates. The negative variance was due to below-than-expected margin aggravated by delay of billings.

Dividends  No dividend was declared in 1QFY13

Key Results Highlights QoQ, the 1QFY13 earnings declined by 29% to RM22.7m in tandem with the lower revenue (-11%) that was aggravated by slower billings in the Middle East. Nonetheless, the slower billings in the region

were understandable as its projects (i.e. Qatar National Museum, King Abdullah Petroleum Studies & Research Centre) here involved the building of more complex structures than usual. Due to this, the company is still negotiating some variation orders with its clients. The overall effect was that its margin got squeezed to 9% in 1QFY13 as compared

to that of 12% in 4QFY12. Management expects the margin to normalise in 2H13 as the negotiation of the variation orders should be finalised soon and hence the billings should then continue to progress.

YoY, the 1QFY13 earnings also declined by 17% to RM24.5m due to the flattish revenue (-2% YoY). Nonetheless, Eversendai got a new stream of income from its 19.3%-owned associate, Technics Oil & Gas (Technics). In 1QFY13, it contributed RM1.0m (4% of 1QFY13 net profit).

Outlook    The current order book stands at RM1.5b, which will last it until 2016. We are bullish on its first recently secured job in Azerbaijian (RM87m) as it will open the door for Eversendai to secure more jobs in the country thanks to its strong delivery track record in the Middle East region (17 years).

We are also bullish on Eversendai’s strategic investment in Technics as it will be able to leverage on the company’s strength and expertise to bid for more Oil & Gas related jobs.

Change to Forecasts There are no changes to our FY13-FY14 forecasts pending more updates from the company at its Analysts Briefing presentation this evening.

Rating Maintain OUTPERFORM

We are maintaining our OUTPERFROM rating given the attractive upside of 22% to our Target Price of

RM1.71.

Valuation   We are also maintaining our Target Price of RM1.71 based on an unchanged 9.0x PER of FY14 EPS.

Risks    Higher raw material costs and delays in its Middle

East and ETP-based project awards.

Source: Kenanga