This article first appeared in The Edge Financial Daily on August 29, 2017 - September 4, 2017

Eversendai Corp Bhd
(Aug 28, RM1.13)
Maintain sell call with an unchanged target price of 58 sen: Eversendai Corp Bhd’s first half of financial year 2017 (1HFY17) core profit of RM31 million came in within expectations, accounting for 48.3% and 52.8% of our and consensus full-year estimates.

Year-on-year, 1HFY17 core profit dipped 20.4% to RM31 million as revenue was flat at RM861.8 million. Operations in India recorded a 49.6% surge in revenue to RM120.2 million, but the oil and gas (O&G) segment recorded a significant reduction of 32.7% in revenue to RM136.9 million. Its O&G division recorded a loss before tax (LBT) of RM2.5 million versus a profit before tax (PBT) of RM3.8 million in the corresponding period last year.

Quarter-on-quarter, its core earnings increased by 5.1% to RM15.9 million, backed by a 17.7% improvement in top line to achieve a record quarterly revenue of RM465.9 million since its listing in July 2011. All divisions, except other geographical segments, recorded an improvement in segmental PBT. The O&G division turned around from a LBT of RM4.7 million to a PBT of RM2.2 million.

The Middle East remained a key market, contributing 56.4% and 88.3% of the group’s revenue and PBT respectively in 1HFY17.

Its net gearing level remained elevated at 1.04 times as of end-June 2017, but we expect the net gearing level to ease after the delivery of the first lift boat by the end of this year.

We maintain our FY17 to FY19 earnings forecasts. To date, the group has secured a total of RM1.377 billion of new contracts. The outstanding order book declined from RM3.2 billion three months ago to RM2.7 billion. — TA Securities, Aug 28