RM2 bil revenue target will be surpassed — Eversendai

KUALA LUMPUR (Sept 6): Eversendai Corp Bhd founder Tan Sri A K Nathan (pictured) has declared that the group’s turnover target of RM2 billion for 2016 will be surpassed. Now, investors will be closely watching how this will translate into the group’s bottom line — which has seen margin compression and eventually fell into the red earlier this year.

Nathan told reporters yesterday that investors can expect the construction and engineering specialist to return to the black in the third quarter ending Sept 30, 2016 (3QFY16), barring unforeseen circumstances.

He said the group suffered a loss in the first half (1HFY16) due to impairments made for its investment in Technics Oil & Gas Ltd.

“We made a bad investment in Singapore and so had to write it off. After 2QFY16, we have zero investment in the oil and gas sector,” said Nathan, who is also Eversendai’s executive chairman and group managing director.

Eversendai’s turnover of RM862.28 million for 1HFY16 had only 8.2% exposure to jobs related to the sector, he added.

Eversendai also announced yesterday it secured RM1.53 billion worth of projects in the first eight months of 2016. Some 42% of the contract value was from projects in the Middle East, including a theme park in Abu Dhabi.

Other contracts were for the structural design, fabrication and erection of steel structures for one of the largest Metro stations in Doha, Blue Water — Dubai Eye, and Tiara United Tower in Dubai, according to a statement.

The second-biggest component in the year-to-date job wins, geographic-wise, was Malaysia and Thailand, at RM504 million. Projects from India were worth RM373.5 million. As at end-June, Eversendai’s order book was worth RM2.4 billion, a new high.

The market welcomed the job wins: Eversendai’s share price closed 5.81% higher at 45.5 sen yesterday, after rising to as high as 47 sen.

Nathan told reporters the group is on track to exceed the RM2 billion turnover target this financial year, a year ahead of the target initially set. “We also have RM20 billion worth of tenders submitted currently. I can’t say more now, but look forward to more good news in the coming months,” he said.

Nathan, who owns 71.76% of Eversendai via his private vehicle Vahana Holdings Sdn Bhd, feels the group is “highly undervalued” in the market. “Even now, it is trading below its net tangible assets.”

Indeed, Eversendai shares were trading at a 35.83% discount to its latest reported book value per share of RM1.27. But construction companies’ values are usually measured by their earnings-multiples, hence it will be interesting to see how Eversendai fares by end-FY16.

Nathan has expressed his five-year target for Eversendai achieving RM2 billion in revenue since early 2012, which would require the company to grow its top line by an average 14.39% from FY12’s RM1.02 billion. Its net profit was RM115.36 million that year.

However, since then, its top and bottom lines have declined sharply.

Eversendai’s recent lowest point was in FY13, where its revenue stood at RM965.05 million and net profit came in at RM32.64 million.

Even though it recovered in FY15 with a net profit of RM55.37 million on an RM1.79 billion revenue, Eversendai’s pre-tax margin in the year fell 77 basis points to 3.8% as its operating and administrative expenses rise of 42.72% outpaced revenue growth.

Nathan said the company is highly cognisant of the need to better its margins. “We know they have come down from what they were three to four years ago. Now, we need to improve productivity and reduce our costs. What we can automate and mechanise, we will do so.”

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This article first appeared in The Edge Financial Daily, on Sept 6, 2016. Subscribe to The Edge Financial Daily here.