Eversendai seen to meet FY18 replenishment target

Eversendai Corp Bhd (Sept 27, 78 sen)
 

Maintain underperform with a target price (TP) of 66.5 sen: Eversendai Corp Bhd announced its winning of four new projects worth RM404 million. We remain “neutral” on the wins as they fall within our financial year ending 2018 estimated (FY18E) replenishment target of RM1.5 billion. Maintain FY18E replenishment target of RM1.5 billion. No change to earnings estimates.

Yesterday, Eversendai announced that it has won four new projects worth RM404 million namely; (i) the construction of glass roof structures in Dubai, (ii) structural steel fabrication and construction package for a combined power plant project in Malaysia, (iii) the construction of a 45-storey high-rise residential tower in India, and (iv) the fabrication and assembly of leg sections for the Offshore Wind Installation Jack Up Vessel in Europe.

The new RM404 million wins brought its year-to-date (YTD) contract replenishment to RM1.12 billion. We remain “neutral” given that the value falls within our FY18E replenishment target of RM1.5 billion — accounting for 75% with another RM380 million to be achieved. Assuming average profit before tax margin of 4% and a 36-month span for the contracts, the projects are expected to contribute around RM4 million to the bottom line per annum.

Currently, Eversendai’s outstanding order book stands at around RM2.8 billion, providing visibility for the next 1-1½ years. YTD contract wins accounted for 75% of our FY18E replenishment target. We believe Eversendai is on track to achieve the remaining RM380 million. Hence, we maintain our FY18E replenishment target of RM1.5 billion. We note that Eversendai has received payment of US$36 million (RM 149 million) for their first lift boat to Vahana and we expect its net gearing to come off to around 0.80 times (from 0.96 times as of 2Q18).

We make no changes to our FY17-18E core net profit.

Maintain “underperform” with an unchanged TP of 66.5 sen based on a valuation of eight times FY19E price-earnings ratio, in line with our applied small-mid cap’s range of 7-12 times.  We pegged Eversendai at the lower end of our valuation range given its: (i) extremely volatile earnings, and (ii) thin margins for its India as well as oil and gas operations. — Kenanga Research, Sept 27