Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on February 12, 2020

Eversendai Corp Bhd
(Feb 11, 37 sen)
Maintain sell with a higher target price (TP) of 25 sen:
Eversendai Corp Bhd has received an offer from Vahana Holdings Sdn Bhd, related to Tan Sri AK Nathan, who is also Eversendai executive chairman and group managing directror, and Narishnath Nathan, Eversendai executive director, to acquire a 100% stake in Vahana Offshore (M) Sdn Bhd, which currently owns the entire Aryan-Inspire Pte Ltd, Arjun-Aspire Pte Ltd and Vahana Marine Solutions DMCC (VMS).

 

Vahana Offshore currently owns and operates a completed liftboat named Vahana Aryan. It is constructing another liftboat called Vahana Arjun, with a target completion date by mid-2021.

Meanwhile, VMS has entered into long-term charter contracts with Zamil Offshore for the charter of Vahana Aryan and Vahana Arjun to work in Saudi Aramco projects.

According to the media, the five-year charter contracts start in June 2020 for Vahana Aryan and June 2021 for Vahana Arjun.

The proposed transaction’s purchase price will be determined on a willing-buyer-willing-seller basis, with the purchase consideration settled via issuing new redeemable convertible preference shares (RCPS) of Eversendai.

The proposed transaction is conditional upon fulfilling, among others, a due diligence review of Vahana Offshore and the subsidiaries, and Eversendai’s board of directors and shareholders’ approval.

The offeror proposed that the parties use their best endeavours to reach an agreement with Eversendai before finalising and executing a Definitive Agreement within 30 days or by March 10 or any extension as may be mutually agreed upon by the parties.

Key information such as the offer price, Vahana Offshore’s financial performance, the liftboats’ charter rates and the term sheet for the RCPS were undisclosed in yesterday’s announcement.

Subject to the offer price, we are mildly positive about the offer. If the transaction materialises, besides providing Eversendai a business with a stable recurring income, it will address the outstanding amount owing by customers under construction contracts and trade receivables amounting to approximately RM241.1 million and RM235.1 million respectively, which have been our concern.

Our earnings forecasts are maintained for now pending further information on the offer.

We are slightly more positive about the outlook for Eversendai given the aforementioned reasons, coupled with the second liftboat Vahana Arjun, of which its construction was suspended previously, having secured a long-term charter contract and the construction scheduled to complete by mid-2021.

With this, our TP-earnings multiple for Eversendai is raised from six times to eight times, arriving at a higher TP of 25 sen, from 18.5 sen previously. Our “sell” call is maintained as the outlook for its existing businesses remains challenging. — TA Securities, Feb 11

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