Eversendai Corp Bhd (Sept 23, RM1.55)
Maintain buy at RM1.58 with target price of RM2.17: Amid the global recession fears, Eversendai secured three new jobs, worth a total of RM371 million in India and the Middle East. No change to our earnings forecasts as we have imputed job win potential in our model.

We continue to like Eversendai: (i) share price has fallen by 10% since its listing in early-July '11 despite its rising order book and bright job-flow prospects; and (ii) our belief that pump-priming is an obvious and politically easy tool to address macroeconomic slump. Maintain "buy" and target price of RM2.17 (12 times 2012 PER).

Eversendai's three new contracts are: (i) RM272 million structural steel and civil works for Worli mixed-use development in Mumbai, India; (ii) RM59 million structural steel works for Salala Airport expansion project in Oman; and (iii) RM39 million structural steel works for Qatar Islamic Studies Centre in Doha, Qatar.

Key takeaways of the projects: (i) completion timeframes are 14-36 months, with much of the earnings recognition in 2012-13; (ii) net margins are high, in the range of 10%-12% as jobs were tendered on a selective bidding basis; and (iii) end-clients are financially sound private investors and local governments.

With the inclusion of the new jobs and also taking into consideration of our expected burn rate of RM300 million for 3Q11, we estimate that Eversendai's outstanding orderbook is lifted by 5% to RM1.46 billion and this should sustain its quarterly earnings growth momentum for the next year.

We retain our earnings forecasts as we have imputed job win potential and the margins are in  line with our forecasts. We estimate that net profit contribution of the three jobs over 2011-13 are RM3 million (accounts for 2% of our 2011 forecast), RM18 million (13% of 2012's) and RM9 million (6% of 2013's) respectively.

We think there is still room to surprise above our RM1.2 billion job wins assumption for 2011 given that the company has secured RM823 million year-to-date and mechanical/structural work for local power plant expansion jobs (ie Janamanjung, Tg Bin) that are worth a total of RM550 million could be dished out in 4Q11. — Maybank IB Research, Sept 23

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