Wednesday 4 June 2014

Eversendai an oil & gas stock?

Those who follow Eversendai close enough may understand the reason behind the disappointing share price movement of the counter since its listing in 2011. Consistently being too bullish, overpromised but under-delivered could be the likely reason why investors losing faith in the company.


KUALA LUMPUR: Eversendai Corp Bhd will make an application to Bursa Malaysia to reclassify the company, given the fact that it has ventured into the oil and gas (O&G) industry.

The company was listed on the Main Market of Bursa Malaysia in July 2011 under the construction sector.
Last year, it established the O&G division, as part of its strategic plan to double its revenue to RM2 billion by 2017, with the aim of delivering stronger profits.

Its order book replenishment has been slow. Excluding the RM580m of contract it secured from related party, the new contracts came in slower than its burn rate of RM1b/year. It is not impossible but will be tough to achieve the target revenue of RM2b by 2014

The company has clinched three contracts worth RM605 million in the O&G industry.

The first contract, worth RM24.7 million, was awarded by Petronas Carigali Iraq Holding B.V. to its wholly-owned unit Eversendai Technics RMC FZE last year.

Through Eversendai Offshore RMC FZE, it won two jobs worth RM580 million from Vahana Offshore (S) Pte Ltd to build lift boats. Vahana Offshore is privately held by Eversendai founder Tan Sri A.K. Nathan.

“I do realise we are classified in the wrong sector. We will make the necessary arrangements to reposition the company on Bursa Malaysia since we are already in O&G,” Nathan said.

It just secured its second oil & gas job. And out of the RM1.7b order book, only about 1/3 is oil & gas related order. Is the group classified in the wrong sector and isn't it too soon to apply for reclassification? The move is understandable as companies in oil & gas sector generally commands better valuation than construction sector.

Eversendai has tendered for US$850 million (RM2.7 billion) worth of O&G-related contracts in the Middle East.

At group level, the company is bidding for between RM10 billion and RM12 billion worth of construction projects.

Its current order book is worth about RM1.7 billion.

Nathan controls 70.95 per cent of Eversendai, an integrated structural steel turnkey and power plant contractor.

According to Bursa Malaysia filings, he has been actively accumulating shares in small numbers since March last year.

The other shareholders in Eversendai are the Employees Provident Fund and Lembaga Tabung Haji, with about 8.07 per cent and 5.2 per cent equities, respectively.

Nathan said he has plans to reduce his stake in the future to enhance liquidity in the company’s shareholding.
“I will release shares in time to come to put more liquidity in the market. But I will do it only if the share price is right,” he said.

Meanwhile, analysts said Eversendai’s share price, which has been hovering between RM1.02 and RM1.13 in the past month, is undervalued. Its initial public offering price was RM1.70.

They are advising investors to hold their position in the company. Their high estimate for Eversendai is RM1.90. Sharen Kaur

More professionalism is needed in writing the article. See page below which is self-explanatory

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