TA Securities

C O M P A N Y U P D A T E
Wednesday, June 08, 2016

A Member of the TA Group FBMKLCI: 1,660.62

MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Sector: Construction

Eversendai Corporation Berhad TP: RM0.66(9.1%)

Bite the Bullet and Move On? Last traded: RM0.605
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* HOLD
Ooi Beng Hooi Tel: +603-2167 9612 benghooi@ta.com.my www.taonline.com.my

TOGL filed application to place the company under judicial management Share Information
The share trading of its 29.9% Singapore-listed associate, Technics Oil & Gas Bloomberg Code EVSD MK
Bursa SENDAI
Ltd (TOGL) has been suspended as an application was filed with High Court of
Stock Code 5205
Singapore to place the company under judicial management. Listing Main Market
Share Cap (mn) 774.0
This comes after TOGL had received 2 writs of summons, from former director Market Cap (RMmn) 468.3
Ting Tiong Ching and Hup Seng Offshore Engineering, claiming repayment of Par Value 0.50
52-wk Hi/Lo (RM) 1.05/0.595
loans of S$1.9mn and S$3mn respectively, plus interest and legal costs. 12-mth Avg Daily Vol ('000 shrs) 1,034.0
Separately, landlord Soilbuild REIT had called on S$11.8mn bank guarantee Estimated Free Float (%) 12.7
with respect to the 18 months rental for the second year of lease for the Beta (x) 1.27
companys premises at 72 Loyang Way. Major Shareholders (%)
Vahana - 71.76
Employee Provident Fund - 7.33
An Investment that Turned Sour Lembaga Tabung Haji - 5.21
Recall, in 2013, SENDAI invested RM117.6mn to own 20.5% (subsequently
diluted to 19.6%) stake in TOGL, a leading full service integrator of Forecast Revision
FY16 FY17
compression systems and process modules for oil and gas customers. The move
Forecast Revision (%) - -
was aimed at enabling the group to leverage on the track record of TOGL to Net profit (RMm) 74.1 63.8
secure a stronger footing in the inter-related oil and gas fabrication sector. In Consensus (RM'mn) 62.9 66.0
March 2016, SENDAI has invested another RM8.8mn to increase its stake in TA's / Consensus (%) 117.9 96.7
TOGL to 29.9%. Previous Rating Hold (Maintained)

Financial Indicators
TOGL recorded losses of S$10.0mn and S$7.5mn in FY13 and FY14 respectively FY16 FY17
before it recovered to record a marginal profit of S$1.1mn in FY15. For 1HFY16, Net Debt / Equity (%) 32.0 7.3
it dipped into the red again with a loss of S$5.6mn. To compound the situation, CFPS (sen) (9.1) 33.7
a contract worth S$70.5mn for the construction of a liftboat with TOGL secured Price / CFPS (x) (6.6) 1.8
in September 2015 had lapsed and become null and void. ROA (%) 2.8 2.6
NTA/Share (RM) 1.4 1.5
Price/NTA (x) 0.4 0.4
As of end-Mar 2016, TOGL carried NAV of S$0.26/ share with net gearing of
0.49x. TOGL share price was last traded at S$0.071 before it was suspended. Share Performance (%)
Price Change SENDAI FBM KLCI
1 mth (13.6) 0.7
Our View 3 mth (12.9) (2.2)
The outlook for TOGL has turned very challenging after TOGL received writs of 6 mth (26.2) (0.7)
summons and application to place the company under judicial management 12 mth (19.9) (4.9)
was filed. In addition, the sizeable S$70.5mn contract for the construction of a
(12-Mth) Share Price relative to the FBM KLCI
liftboat has become null and void. Given the negativities surrounding TOGL, the
company may find it difficult to bid and secure new jobs.

In our opinion, capital injection and restructuring are required in order to

revive the TOGL. Coupled with the current tough operating environment in the
oil & gas sector, we are of the view that it could be a better option for SENDAI to
bite the bullet and focus on its core business in structural steel works, which we
deem as low-hanging fruit for SENDAI, rather than risking its resources by
injecting further capital in TOGL, trying to turnaround the company.

Source: Bloomberg
We estimate that the investment in TOGL carried a book value of RM38mn as of
end-March 2016. We expect further impairment in 2Q16 but we see this as an
one-off item, and the negativities surrounding its investment in TOGL has been
largely priced in.
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 TA Securities
A Member of the TA Group 8-Jun-16
Outlook
In 1Q16 alone, the group has secured sizeable RM700mn of new job, boosting
its outstanding order book to RM2.2bn. With 9 months remaining in FY16, we
see the possibility of the group breaking the record of RM1.7bn of new jobs
secured in FY15. However, the receivables from the lift boat project could be a
concern to us as there is still lack of clarity how the client finances the
investment in the lift boats.

Impact
Maintain.

Valuation
No change to our target price of RM0.66, based on unchanged 8x CY17 EPS.
Maintain our HOLD call on SENDAI.

Financial Statements
Profit & Loss (RMm) Balance Sheet (RMm)
YE Dec 31 2014 2015 2016F 2017F 2018F YE Dec 31 2014 2015 2016F 2017F 2018F
Revenue 1002.8 1788.8 1502.3 1149.5 1138.9 Fixed assets 446.1 649.2 624.0 601.6 581.8
EBITDA 101.7 143.2 131.7 189.8 183.5 Others 116.3 107.6 107.6 107.6 107.6
Dep. & amortisation (31.5) (31.9) (74.7) (71.8) (69.2) NCA 562.4 756.7 731.5 709.2 689.4
Net finance cost (24.4) (32.6) (42.7) (43.5) (40.5) Cash 242.7 134.8 395.8 615.9 642.6
PBT 45.8 68.2 14.4 74.5 73.8 Others 1,181.9 1,789.7 1,401.1 1,074.4 1,064.6
Taxation (9.3) (6.0) (8.8) (7.4) (7.4) CA 1,424.6 1,924.6 1,796.9 1,690.4 1,707.2
MI (1.0) 6.3 4.7 3.2 3.2
Net profit 37.4 55.9 0.9 63.8 63.3 Total assets 1,987.0 2,681.3 2,528.5 2,399.5 2,396.6
Core net profit 23.7 47.4 74.1 63.8 63.3
GDPS (sen) 1.3 0.5 1.0 1.0 1.0 ST borrowings 248.1 500.8 480.8 450.8 420.8
Div Yield (%) 2.1 0.8 1.7 1.7 1.7 Other liabilities 496.1 687.5 594.6 464.1 460.2
CL 744.2 1,188.3 1,075.4 914.9 881.0
Cash Flow (RMm) Shareholders' funds 909.6 1,122.3 1,107.7 1,156.0 1,203.8
YE Dec 31 2014 2015 2016F 2017F 2018F MI 0.3 7.8 12.6 15.8 19.0
PBT 45.8 68.2 14.4 74.5 73.8 LT borrowings 288.8 299.7 269.7 249.7 229.7
Non cash expenses 30.6 66.7 117.3 115.3 109.7 Other LT liabilities 44.1 63.2 63.2 63.2 63.2
Non Operating expenses 76.5 (41.9) (51.4) (51.0) (47.9)
Changes in WC 5.8 (387.3) 295.7 196.2 5.9 Total capital 1,987.0 2,681.3 2,528.5 2,399.5 2,396.6
Operational cash flow 76.5 294.2 375.9 335.0 141.5
Capex (100.2) (126.4) (50.0) (50.0) (50.0) Ratio
Others 67.1 96.4 0.5 0.6 0.6 YE Dec 31 2014 2015 2016F 2017F 2018F
Investment cash flow (33.1) (30.0) (49.5) (49.4) (49.4) EBITDA Margins (%) 10.1 8.0 8.8 16.5 16.1
Debt raised/(repaid) 28.2 259.3 (50.0) (50.0) (50.0) Core EPS (sen) 3.1 8.1 9.6 8.2 8.2
Dividend (11.0) (9.7) (15.5) (15.5) (15.5) EPS Growth (%) (58.6) 162.8 18.8 (13.9) (0.9)
Others (28.3) 0.8 0.0 0.0 0.0 PER (x) 19.7 7.5 6.3 7.3 7.4
Financial cash flow (11.1) 250.4 (65.5) (65.5) (65.5) GDPS (sen) 1.3 0.5 1.0 1.0 1.0
Net cash flow 32.3 (106.4) 261.0 220.1 26.7 Div Yield (%) 2.1 0.8 1.7 1.7 1.7

Net cash (RMmn) (199.5) (657.1) (346.1) (76.0) 0.6

Net gearing (%) 32.3 59.3 32.0 7.3 0.7
ROE (%) 2.7 4.7 6.6 5.6 5.4
ROA (%) 1.3 2.0 2.8 2.6 2.6
NTA (RM) 1.16 1.44 1.43 1.50 1.56
P/NTA(x) 0.5 0.4 0.4 0.4 0.4

Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and
opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts.
We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may
have an interest in the securities and/or companies mentioned herein.
for TA SECURITIES HOLDINGS BERHAD(14948-M)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
Kaladher Govindan Head of Research
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