Eversendai: Solid as Steel?

The next IPO in Bursa will be Eversendai, which will be listed tomorrow. It mainly involves in steel work and construction. Though it's a Malaysia company, more than half of its jobs are done overseas. Its founder or chairman or MD, Dato AK Nathan, is one of Malaysia's richest man and will still hold 70% of Eversendai's share after listing. 

Here are some facts:

• Order book at RM1.5bil, 94% will be realized in 2011, the rest before 2013.
• Strong presence in Qatar & UAE, with 76% of 2010 revenue is from the middle east.
• Expanding to Oman, Saudi, India & South East Asia.
• Completed over 100 projects in 11 countries with 0% delay.
• Good track record and reputation internationally.
• Malaysia projects: KLCC, KLIA, KL Sentral, KL Tower etc.
• Middle East projects: Burj Al Arab, Dubai Mall, New Doha Airport, Emirates Tower etc.
• A leader with market share of 26.5% in fabrication facility in UAE and Qatar.
• To date secured RM350mil contract this year.
• Just secured a RM139mil contract from Qatar Petroleum.
• Qatar will massively improve their infrastructure for 2022 Fifa World Cup.
• No dividend in the near future.

     Burj Al Arab

From Eversendai's involvement in some of the world-renowned projects, it should not be very difficult for it to secure future big projects, I guess.

     Emirates Towers

Financial results:

RM mil	2010	2009	2008
Revenue	760	833	784
Net Profit	127	85	61

Although the net profit registers an impressive growth, the revenue is falling. Is this something to worry about? Has the business reached its peak. Is there another strong competitor emerging? According to the founder, 94% of the RM1.5b order will be realized this year. Does he mean the revenue for 2011 will be RM1.4bil???

At end 2010	RM mil
Cash	142
Non-current debt	10
Current debt	378

Eversendai is in net debt and has lots of short term debt to pay. That may be why it decides to get "cheap" cash from IPO now. The IPO will raise RM273mil, which will improve the cash to RM415mil, resulting in a slightly net cash position.

    KLCC

The IPO price is fixed at RM1.62 for retail and RM1.70 for institution. Here are various analysts' fair value for Eversendai.

Alliance	1.98
RHB	2.27
OSK	2.31
ECM Libra	2.36
TA	2.46

The IPO is 7.3x over-subscribed. Is it worth to jump in tomorrow on its first listing day? I have a feeling that it may follow MSM's debut performance.