News

SENDAI announced that it has secured multiple new projects worth RM250m in various countries.

The projects are: (i) structural steel jobs for Dhirumbai Ambani International Convention and Exhibition Centre in India, (ii) construction of luxury residential project in Worli, Mumbai, (iii) structural steel works for UAE’s theme park, (iv) fabrication of skid shoes for Umm Lulu Gas Treatment Platform in Abu Dhabi, and (v) structural steel works package for the Pengerang Co-generation plant.

Comments

POSITIVE on the job flows as including these jobs, SENDAI has secured RM1.1b, making up 74.2% of our full-year new contracts assumption of RM1.5b. With this pace of job flows, we would not be surprised if SENDAI even beat their own target of new contracts for FY15 of RM1.5b.

Assuming 6% PATAMI margin (in line with our assumption), these contracts would contribute about total RM15m (1.9 sen/share) (18% of FY16 earnings) to SENDAI’s PATAMI, which will be spread over 1-2 years.

Outlook

SENDAI has shown that it has delivered its promise to turn around by massive improvement in earnings via margins expansion as well as superior orderbook growth.

We estimate, by now SENDAI’s outstanding orderbook currently stands at about RM2.0b. Note that this is their record-high orderbook which will provide earnings visibility for the next two years. Bulk of the orderbook came from the Middle Eastern region and the orderbook will last for the next two years.

As for jobs prospects, currently SENDAI has ~RM10-11.0b tenderbook, mostly are from the Middle Eastern Region.

Forecast

Unchanged as the contract value came in within our estimates.

Rating

Maintain OUTPERFORM

Valuation

Maintain TP of RM1.08. Our TP implies FY16 PER of 11.0x in line with our target small-mid caps’ PER range of 10x-14x.

Risks to Our Call

Lower-than-expected margins

Lower-than-expected orderbook progress

Lower-than-expected new contracts

Forex fluctuation risks

Source: Kenanga Research - 30 Jun 2015