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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