Wednesday 16 January 2013

Eversendai Corporation - Bags RM325m airport job


News   Eversendai (“SENDAI”) announced that it had secured a sub-contract worth RM365m to carry out structural steel works for the piers and gatehouses (Packages 2 + 4) of the Abu Dhabi International Airport – Midfield Terminal Building.
  
Comments   A good start for the year. We are positive on this announcement as the contract considered significant to our order book replenishment expectation for FY13 at c.RM1.7b. The new contract gave another strong evidence of SENDAI’s firm presence in the Middle

East construction sector. While management is also actively looking at India and GCC market, we believe that the company will continue to secure projects from the Middle East this year. 

 We understand that the scope of work of the abovementioned contract includes structural steel works for the piers, jet bridges and gate houses of Abu Dhabi International Airport. The construction will commence by February and is slated for completion by 2015.

 Building visibilities for the next two to three years.  To recap, SENDAI has successfully secured c.RM900m worth of contracts in 2012, which was above our expectations. With this new contract secured, its order book now stands at RM1.8b, which could last it another two to three years. 
 
  
Outlook  Moving forward, we expect the group investment in Technics to bear fruit in the medium term as we believe that the management could venture into the oil and gas sector to coKenanmplement its steel fabrication business. Technics will be a strong candidate for SENDAI to venture into the oil and gas industry as the latter can leverage on Technics’ established track record and its own existing capacity. To date, SENDAI has an equity holding of 13.9% in Technics.
  
Forecast  No changes to our earnings forecasts.
  
Rating     Upgrade to OUTPERFORM
 We have upgraded our recommendation from a MARKET PERFORM to an OUTPERFORM as the price has slipped recently and now offers a 16% upside toour unchanged Target Price of RM1.44. 
  
Valuation   We are maintaining our  Target Price of RM1.44 based on an unchanged 8.0x PER on the FY13 EPS.
  
Risks  Escalating raw material costs.
 Delays in construction projects.

Source: Kenanga

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