The Borneo Post

Kenanga maintains Eversendai at underperfo­rm due to delays in lift boats

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KUCHING: Kenanga Investment Bank Bhd ( Kenanga Research) is maintainin­g its ‘ Underperfo­rm’ call on Eversendai Corporatio­n Bhd ( Eversendai) due to the continued delay in the delivery of its lift boats.

In a report, Kenanga research detailed that Eversndai’s first lift boat which was initially schedule for delivery in the third quarter of 2017 (3Q17) has been delayed to 1Q18 as certificat­ion and commission of the lift boat is more stringent than Sendai has expected.

“The second lift boat which is at circa 55 to 60 per cent completion and scheduled for delivery by the first half of 2018 (1H18) may be delayed to a later date given the longer than expected duration for certificat­ion as well,” added the research arm.

Whi le it is understood that Eversendai’s li f t boat client – Vahana Holdings Bhd ( Vahana) – has already obtained conditiona­l financing for the first lift boat, the research arm guides that there is still a risk of impairment in FY19 should Vahana fail to secure a charter within 12 months of the boat being ready for delivery as banks will only release payments to Eversendai once a charter contract is secured.

Additional­ly for the second boat, the research arm is also weary that there is potential of it failing to secure financing, which could lead to the raising of risk of impairment­s for Eversendai.

With this in mind alongside Eversendai’s existing high gear ing of 1.0 fold and historical­ly volatile earnings, Kenanga Research has decided to maintain its ‘ underperfo­rm’ rating on the stock with a lower target price of RM0.740 as they base their valuations at the lower end of their applied small- mid cap player’s range – 8.0 fold FY18E price earnings ratio.

That being said, Sendai has started off 2018 well with the acquisitio­n of two new contracts worth RM272 million in Dubai – one Za’abeel mix-used developed, and the Address Tower Residence IL Primo luxury high- end residentia­l tower.

Accounting for 15 per cent of Kenanga Research’s FY18E replenishm­ent target of RM1.8 billion, the wins are within expectatio­ns and assuming a 36- month span for the contracts coupled with profit before tax ( PBT) margins of 6 per cent, the research arm has guided that they are expecting the projects to contribute circa RM4.1 million per annum to Sendai’s bottom-line.

Eve r s end a i ’ s cu r r ent outstandin­g order- book stands at circa RM3.5 bi l l ion and provides earnings visibility for the group for the next 1 to 1.5 years.

 ??  ?? Eversndai’s first lift boat which was initially schedule for delivery in the third quarter of 2017 (3Q17) has been delayed to 1Q18 as certificat­ion and commission of the lift boat is more stringent than Sendai has expected.
Eversndai’s first lift boat which was initially schedule for delivery in the third quarter of 2017 (3Q17) has been delayed to 1Q18 as certificat­ion and commission of the lift boat is more stringent than Sendai has expected.

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