Eversendai - Steel Class Of Its Own

Eversendai (BUY; NEW)

Steel Class Of Its Own

• Eversendai has crafted a niche as a specialist in the steel structure construction works which has several advantages over traditional RC construction method. The company has four strategically located fabrication facilities with an annual capacity of 119,000MT pa which provides economies of scales for a competitive quote during the tendering stage.
• Moreover, Eversendai is involved in the early design and consultancy stages of a proposal down to the fabrication and construction phase, hence providing the company with a technical advantage over its other competitors to deliver the project on time.
• The company has played an important role in many international landmark projects and have also fostered close working relationships with reputable and internationally established contractors.
• Eversendai has an outstanding order book of ~RM1.37bn, translating to ~1.3x FY11’s revenue and ~1.06x order book-to-market cap ratio. The company is tendering for ~RM12bn worth of contracts and based on its historically hit rate of 20%, the company has a good chance of securing an additional RM2.4bn worth of new projects.
• We forecast a modest FY12-FY14 earnings CAGR of 4% and order book replenishment rate of RM1bn-1.5bn. Initiate with a BUY call with TP of RM2.00 as we favour Eversendai’s niche as a steel specialist contractor and decent order book size, but trading at undemanding valuation.

Source: HLIB Research - 5 April 2012