This article first appeared in The Edge Financial Daily on June 4, 2018
Eversendai Corp Bhd
(June 1, 92.5 sen)
Maintain hold with a lower target price (TP) of RM1.05 from RM1.14 previously: Eversendai Corp Bhd’s core earnings in the first quarter of financial year 2018 (1QFY18) came in below our and consensus expectations. The oil and gas (O&G) segment saw recovery, reporting a small pre-tax profit (PBT) of RM1 million, compared to losses in 1QFY17. However, this was offset by its other key segments which reported lower PBT contributions year-on-year (y-o-y).
Excluding a RM8.4 million in unrealised foreign exchange gain and a one-off reversal of RM3.2 million for foreseeable loss, 1QFY18 core net profit of RM15 million (flat y-o-y, -33% quarter-on-quarter [q-o-q]) met 21% and 20% of our and consensus full-year estimates respectively.
Y-o-y, its O&G division reported a recovery with a small PBT of RM1 million in 1QFY18, compared to losses of RM5 million in 1QFY17, on the back of contribution from its offshore fabrication project for Saudi Aramco. However, its other key divisions in the Middle East, India and Malaysia all reported weaker y-o-y contributions at the PBT level.
Eversendai has secured RM716 million new jobs year to date for financial year 2018, (RM534 million as of end-March), bringing its outstanding order book to RM2 billion. We have already assumed RM1.5 billion per annum of job wins within our forecast years. Taking into account the weaker 1QFY18, we lower our FY18 net profit forecast by 5% after adjusting for lower margins of 0.5 percentage points for its Middle East segment.
Net gearing remained high at 0.94 times as of end-March 2018 due to its financing of its liftboat contracts. Receivables and unbilled amount on work done also remain high at RM1.58 billion due to the payment structure of its liftboats. The first liftboat is expected to be delivered to Vahana by the first week of June which could alleviate its balance sheet woes. — Maybank IB Research, June 1