KUALA LUMPUR (Sept 8): Eversendai Corporation Bhd shares pared gains made in early trade today despite an analyst projection that weak earnings in the second quarter of financial year 2015 (2QFY15) be offset by a strong orderbook and strengthening US dollar.

The stock had gained gained 3 sen or 4.23% to 74 sen, before slipping to 72 sen. A total of 980,400 shares changed hands.

In a note today, Hong Leong Investment Bank said despite a slower growth in earnings in the second quarter of financial year 2015 (2QFY15) of RM4.1 million compared to RM25.8 million recorded in the first quarter of financial year 2015 (1QFY15), Eversendai’s orderbook was still plump and the company is also a beneficiary of the stronger US dollar.

The research firm noted that the company’s current orderbook of RM1.8 billion, which translates to 1.7 times of its revenue in financial year 2014 (FY14), is still much higher than its historical range between 1.1 times and 1.6 times.

“Year to date (YTD) job wins have totalled RM1.1 billion for Eversendai, already matching the full year sum for FY14,” the report stated.

“Management is hopeful that FY15 will be a record year for job wins, even surpassing its previous record in financial year 2010 (FY10) at RM1.7 billion.”

Hong Leong Investment also noted that the company could clinch several sizable projects due to final stages of approval from clients.

The research firm also said Eversendai is a beneficiary of the stronger US dollar as 73% of its orderbook constitutes projects in the Middle East, where local currencies are pegged to the US dollar.

The ringgit reached a new 17-year low 4.3405 against the US dollar yesterday on the back of the strengthening greenback against most Asian currencies and a drop in crude oil prices, which added more pressure on the ringgit.

The ringgit is currently trading 0.31% lower at 4.3433 against the greenback.

Despite Eversendai’s strong orderbook, Hong Leong Investment noted that its execution, particularly the high-end, luxury residential project in Worli and the power plant project in Tanjung Bin, is the key risk to prospects of earnings recovery.

The research firm said the company needs to better match its revenue and cost recognition to prevent “wild swings” in its earnings from quarter to quarter.

Hong Leong Investment had cut its FY15 and FY17 earnings projections by 11% to 18% following the company’s 2QFY15 results.

“Admittedly, the weak 2QFY15 results have slowed down Eversendai’s earnings recovery process. However, this does not derail our investment case on the stock which is anchored by a healthy orderbook balance, surging job wins and strengthening US dollar,” the report stated.

The research firm maintained its “Buy” rating on Eversendai, with a target price of RM1.10.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)