Thursday, September 5, 2013


30 JEWELS 2013 Edition

Eversendai Corp
Target: MYR2.09
Price: MYR1.53
A World-Class Structural Steel Contractor

Investment Merits
•Proxy to oil wealth, or more precisely, the indulgence of oil-rich countries in constructing new iconic buildings that require highly complex steel structures

•A trusted structural steel specialist subcontractor to international contractors, having completed structural steel packages of many iconic projects in the Middle East including Burj Khalifa
•An up-and-coming oil and gas (O&G) play, leveraging on its newly acquired topside fabricator Technics Oil & Gas

Company Profile
Eversendai is a structural steel specialist with operations predominantly in the Middle East, Malaysia and India. It is venturing into topside fabrication, leveraging on a newly acquired 20.1% stake in SGX-listed topside fabricator Technics Oil & Gas (TGH SI; SELL, FV: SGD0.64).

Structural steel specialist. Eversendai operates predominantly in the Middle East, Malaysia and India. It owns four fabrication plants with a combined annual capacity of 119,000 tonnes in Rawang (Malaysia), Hamriyah (Sharjah), Doha (Qatar) and Al Qusais (Dubai).

Home-grown international contractor. We consider Eversendai a “rare breed” among Malaysian construction companies as its “home turf” has been the international market right from the very start, being a specialist contractor to international contractors. It is almost indifferent to the construction cycle in Malaysia. Having participated and completed structural steel packages of many iconic projects in the Middle East including Burj Al Arab Hotel, Burj Khalifa and Ski Dubai for international contractors such as Samsung Corp, Taisei Corp and Hyundai Engineering & Construction, Eversendai is well regarded in the international construction sector.

Collaboration with TGH shifts to higher gear. Eversendai expects to complete the MYR50m Phase 1 of the fabrication yard in the Middle East – a 70:30 JV with 20.1%-owned TGH – four to six months from now. The JV has secured a 25+25 year lease (at a lease rental rate of about MYR8m p.a.) for a piece of sea-fronting land measuring 200,000 sq m in Ras al-Khaimah, one of the seven emirates of the UAE about two-hour drive from Dubai. Already, the JV has embarked on a recruitment drive and has thus far submitted bids for at least three contracts worth a total MYR700m-MYR800m, predominantly for topside modules and mechanical installations in the Middle East.

Strong earnings visibility. Eversendai’s earnings visibility is strong, underpinned by an outstanding orderbook worth about MYR1.5bn. We like Eversendai due to the following: i) it is a truly global construction company, carrying with it the ability, skill set and track record to compete, survive and prosper in the international structural steel market, ii) it is a good proxy to oil wealth, or more precisely, indulgence of oil-rich countries (in the Middle East, and increasingly, the former Soviet states) in coming out with new iconic buildings, which require highly complex steel structures, and iii) it is also an up-and-coming O&G play, leveraging on its newly acquired topside fabricator TGH.

Company Report Card
Latest results. FY12 net profit eased 3% as some newly secured contracts had yet to hit significant billing milestones, while slight delays in account closing of certain completed projects deferred profit recognition to the subsequent quarter.

Balance sheet / Cashflow. As at 31 Dec 2012, Eversendai had net cash of MYR18.8m. The company still registered a free cashflow of MYR76.2m in FY12 even after incurring a substantial capex of MYR41m.

ROE. ROE of 15.4% in FY12 was above the industry average of 11%.

Dividend. The company declared a single-tier dividend of 4 sen per share in FY12, which translated into a net yield of 2.6%.

Management. At the helm of the company is founder, executive chairman and group managing director Tan Sri Nathan a/l Elumalay, who has had about 30 years of experience in the structural steel sector.

Our valuation is MYR2.09 based on 12x FY14 EPS, in line with our oneyear forward target P/E of 10-16x for the construction sector. BUY.

Source/Extract/Excerpts/来源/转贴/摘录: RHB-Research,
Publish date:30/07/13

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