News Eversendai yesterday announced in a press release that it has secured oil & gas contracts for two separate packages valued at RM72.2m.
This contract is for the Petronas’ Terengganu Gas Terminal (TGAST) Project - Phase 2, which was awarded by Samsung Engineering (M) Sdn Bhd.
Eversendai’s scope of work includes supply and installation of steel structures as well as the fabrication and erection of piping and mechanical equipments.
The project is scheduled to commence in the 3Q14 and be completed by 1Q16.
Comments Positive on the job wins as this contract will boost its outstanding orderbook to RM1.77b (2-3 years visibility).
Year-to-date, we estimate the group has secured about RM1.17b new contracts, beating our FY14 total orderbook replenishment assumption of RM1.0b.
Assuming average net margin of 10%, this project will contribute about RM3.6m per annum to their bottomline.
Outlook Despite the recent earnings disappointment which we believe was only a “temporary glitch”, it is worth noting that for the first 9 months of FY14, Eversendai has secured RM1.17b worth of contracts, exceeding even the full year FY13 job wins of RM670m. It also exceeded our FY14 replenishment orderbook assumption of RM1.0b.
In addition, we reaffirm our view that Eversendai’s sizeable O&G-related job, namely the RM588m liftboat contract that it secured in May 2014 could be a prelude of bigger things to come within this segment.
Elsewhere, the group continues looking for more steel structural jobs in the Middle East, particularly in Qatar, Azerbaijan and Dubai.
Forecast Although the group has exceeded our replenishment target for the year of RM1.0b, we opt to be conservative and maintain our assumptions for now.
Rating Maintain OUTPERFORM
Judging from the expected significant recovery of earnings next year driven by its sizeable orderbook, we believe the recent earnings disappointments are likely already priced in at current level, implying limited downside risks. We also believe that the market will eventually take note of their rapidly growing orderbook.
Valuation Maintain TP of RM1.11 based on 8.5x fwd-PER on FY15 EPS. Our applied PER is within the small-cap construction peers’ PER range of 8x-10x.
Risks to Our Call Another earnings disappointment
Lower-than-expected progress in construction projects
Higher-than-expected input costs.
Source: Kenanga
Chart | Stock Name | Last | Change | Volume |
---|