22 June 2011

New IPO: Eversendai

En-route to Main Board of Bursa Malaysia on 1st July 2011, Eversendai Corp is a structural steel specialist with operations predominantly in the Middle East, Malaysia and India. Currently, the company is bidding for RM1.5 billion worth of infrastructure, high-rise building and power plant projects in Southeast Asia, India and Middle East after being invited by public and private sectors.

Its outstanding construction order book stood at RM1.4 billion as at 16th May 2011, while owning 4 fabrication plants in Malaysia and Middle East with a combined annual capacity of 119,000 tonnes.

What is so attractive about Eversendai?

According to RHB Research, Eversendai's key appeal to investors lies in:
  1. It being a rare "outside-looking-in" home-grown construction company that has excelled in the international market, particularly, the Middle East, based on its own strength, practically almost indifferent to the local construction cycle;
  2. The recognition by key international contractors as a highly reliable structural steel contractor from past assignments puts Eversendai in a sweet spot in the sense that it is often named the structural steel subcontractor by most international contractors participating in the same international tenders;
  3. Its strong market position in UAE and Qatar by virtue of its 26.5% market share in terms of fabrication capacity; and
  4. Its good earnings visibility underpinned by RM1.4 billion outstanding order book and strong likelihood of securing about another RM1 billion worth of new jobs by end of the year.
Eversendai's expertise in power plant was gained from the construction of the Tanjung Bin, Manjung and Jimah power plants several years ago. In India, it has 4 on-going power plant projects.
Source: Business Times
Source: RHB Research
Maybank Investment Bank Bhd is the sole adviser, underwriter and book runner for the IPO. Meanwhile, RHB Research is projecting the earning per share (EPS) of Eversendai to grow by 15.1% and 12% in FY12/12-13, assuming it is to secure RM1.4bn, RM1.5bn, and RM1.6bn worth of new contracts in FY12/11-13. As such, it arrived at an indicative fair value of RM2.27 for Eversendai based on 14x FY12/12 EPS.

If that is true, there is a 33% upside from the RM1.70 IPO price. Would it be a good BUY?

Eversendai final retail price fixed at RM1.62 per share, while institutional price at RM1.70.

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