Eversendai (BUY; NEW)
Steel Class Of Its Own
- Eversendai has crafted a niche as a specialist in the steel structureconstruction works which has several advantages over traditional RCconstruction method. The company has four strategically located fabricationfacilities with an annual capacity of 119,000MT pa which provides economies ofscales for a competitive quote during the tendering stage.
- Moreover, Eversendai is involved in the early design and consultancystages of a proposal down to the fabrication and construction phase, henceproviding the company with a technical advantage over its other competitors todeliver the project on time.
- The company has played an important role in many international landmarkprojects and have also fostered close working relationships with reputable andinternationally 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 istendering for ~RM12bn worth of contracts and based on its historically hit rateof 20%, the company has a good chance of securing an additional RM2.4bn worthof new projects.
- We forecast a modest FY12-FY14 earnings CAGR of 4% and order bookreplenishment rate of RM1bn-1.5bn. Initiate with a BUY call with TP of RM2.00as we favour Eversendai's niche as a steel specialist contractor and decentorder book size, but trading at undemanding valuation.
Source: HLIB Research - 5 April 2012
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