Kenanga maintains underperform on Everendai, TP of 50.5sen

KUALA LUMPUR: Eversendai Corp Bhd has announced new contract wins of RM406mil, which increased its outstanding order book to about RM2.5bil and provide visibility for the next one to 1.5 years.

In a research note, Kenanga research said it is neutral on these new contract wins as they collectively fall within its replenishment target of RM1.6bil for FY19.

The research house said it has a remaining replenishment target of RM953mil after accounting for the recent wins. 

"Assuming an average PBT margin of 4% and a 36-month span for the contracts, the projects are expected to contribute c.RM5.2m per annum to the bottom-line," it said.

Kenanga has maintained its underperform rating on Eversendai with an unchanged target price of 50.5 sen based on an unchanged valuation of 7x FY19E price-earnings.

It said in its outlook that the group has received payment of US$36mil for its first lift boat to Vahana in 2Q18. It expects Eversendai to receive the remaining US$54mil payment and its net gearing to come off to about 0.81x from 1.06x as at 3Q18.

"We maintain our less upbeat outlook for now, as we continue to closely monitor and await the following catalysts; (i) more concrete signs of upbeat prospects for the construction sector and earnings delivery, (ii) higher order-book replenishments from SENDAI’s existing tender book of c.RM10.0b, and (iii) reduction in net gearing following the remaining payment of USD54m. 

"Should the above developments take place, we may look to review our estimates."