By Xavier Kong
Having achieved 72% of the value of its 2014 job wins within the first quarter of 2015 itself, it looks to be a record-breaking year for Eversendai. However, the worry remains that the company’s target market of the Middle East would start to lower expenditure. Will Eversendai’s success be long-lasting?
Business model: Eversendai, incorporated in 1993, specialises in steel construction. The company has since evolved from a structural steel erection specialist to an integrated structural steel turnkey contractor with a design and engineering division as well as modern fabrication facilities in Malaysia, UAE and Qatar.
Among its major projects were steel works for Kuala Lumpur Tower, Petronas Tower 2, PKT Logistics, KL Sentral Station, coal-fired power plant boilers in Malaysia, the Burj Al Arab, Dubai Mall, Ski Dubai and Burj Khalifa in Dubai, United Arab Emirates (UAE); Capital Gate in Abu Dhabi, UAE and the New Doha International Airport in Doha, Qatar.
Eversendai Group is also diversifying into the manufacturing of liftboats for the offshore oil & gas (O&G) industry. It currently employs over 10,000 staff in seven countries and operates out of 10 offices. Eversendai was listed on Bursa Malaysia in 2011.
Within the first quarter of 2015, Eversendai has managed to secure jobs worth a total of RM864 million, 72% of the company’s total contract worth in the whole of 2014.
The two latest jobs, the construction of depots for the Riyadh Metro worth RM203 million, as well as the roofing works and walling for a conversion hangar in Riyadh worth RM43 million, would raise the company’s order book to about RM2 billion, which would see contributions to the group until 2016.
Shareholders and management: Eversendai’s founder Nathan Elumalay is also currently its executive chairman and group managing director. He is also a majority shareholder of Eversendai with a 71.8% stake via his vehicle Vahana Holdings.
Other substantial shareholders of Eversendai are the Employees Provident Fund with a 6.8% stake, and Lembaga Tabung Haji, with a 5.2% stake.
Share performance:
What analysts think: Analysts are upbeat about the job wins, and see financial year 2015 (FY15) as a record-breaking year for Eversendai.
One particular reason is that the job win to build depots for the Riyadh Metro is but the first phase in an entire project worth US$22.5 billion (RM83.2 billion), according to MIDF Research.
Nathan Elumalay had told KiniBiz that he is “confident” about the year, and that “2015 looks promising”.
“We have built up a reputation over the last 18 years there, and this is showing in the growth and business opportunities there for us,” said the founder of Eversendai.
Analysts have agreed that Eversendai could very well beat their estimates for the full year of 2015. Kenanga IB has stated that “with this pace of job flows, we would not be surprised if Eversendai beat our full-year new jobs assumption of RM1.5 billion.”
Maybank IB had also raised their order book estimations to RM1.8 billion from their initial RM1.4 billion, and noted that job flow in the Middle East remains bright due to the infrastructure requirements for mega events, like the World Expo 2020 in Dubai and the 2022 World Cup in Qatar.
“Additionally, Saudi Arabia has also vowed to continue the development progress of the country, in view of the burgeoning young population,” added Maybank IB.
This answers the concerns from some quarters, who had expressed that the Middle East, Eversendai’s target market, would reduce expenditure due to low oil prices.
Nathan himself had also stated that oil price would “have not much effect”, instead pointing out that a view of the big picture is needed, and referenced the RM864 million worth of contracts the company had secured for its order book within the past quarter.
Earnings forecast:
Stockstalk: The last time KiniBiz looked at Eversendai, the company’s share price had been taking a beating, coming in at a price of 50 sen per share on Jan 12, 2015. Now, three months later, Eversendai’s share price has recovered to 78.5 sen at end of March 17, 2015.
While nowhere near the stock’s one year high of RM1.12, which the company saw in the last week of April 2014, this represents an opportunity for investors to hop in on an up-and-coming stock with potential for more contracts in the coming months.
At the same time, the company has also been moving into the O&G sector, with its offshore arm, established in 2010, providing support vessels and deploying self-elevating, self-propelled jack up rigs.
In the midst of the current weakness in oil prices, the founder points towards the bigger picture, that the company still has construction as its primary focus, and, with the company’s target market having shown that the flow of jobs will continue, notes that oil prices will have little effect on the company.
However, this still remains a point of caution for investors, as the Middle East is indeed mostly dependent on the price of oil.
Nevertheless, the company is confident that it will secure more packages for the construction of the Riyadh Metro, a US$22.5 billion project. The company’s confidence is not baseless either, considering it has secured the depot construction package and developed a good reputation in the Middle East.
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Important Note and Disclaimer: This article should NOT be taken as a cue to either buy or sell the stock. The intention is to highlight the key factors you might want to think about before plunging in or scrambling out. While KiniBiz makes every endeavour to ensure facts are right and opinion is fair, no liability can be assumed for anyone relying on this information. In other words let the buyer (or seller) beware — a reflection of Bursa Malaysia, we say.
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