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Monday, June 6, 2016

Trading Idea - Strong RM2.2bn orderbook to cushion downturn in oil & gas sector

  • In the news. According to the STARBIZ week on 4 June, Sendai is assessing a suitable course of action to be taken with regard to its 29.87% stake in Singaporelisted Technics Oil & Gas Ltd, which has lost almost 70% of its value amid downturn in the O&G industry coupled with a string of legal suits . Nevertheless, Sendai’s executive chairman and group managing director Tan Sri A.K. Nathan remains optimistic of its LT prospects given its strong tender book of RM22bn, of which RM10bn is for structural steel and construction projects and RM12bn for O&G jobs.
  • According to HLIB Institutional research (a BUY rating with SOP TP of RM0.91), Sendai managed to amass over RM700m worth of new jobs in 1Q (orderbook now at a record RM2.2bn). This is a commendable sum as it already made up 41% of the full year amount in FY15 which was a record high of RM1.7bn. Some of the notable job wins this year include (i) KL118 tower, (ii) a mixed development in KL, (iii) Al Maryah Central Mall in Abu Dhabi, (iv) Dubai Eye Ferris wheel and (v) its maiden job win in Thailand involving M&E for a 600MW coal fired plant.
  • Technically speaking. Sendai’s share prices had plunged 41.4% from 52-week high to end at RM0.615 last Friday. Despite its grossly oversold positions, near term outlook for Sendai remains uncertain following the breakdown of multiple key SMAs supports. Share prices are likely to build a base near critical supports of RM0.57-0.60 levels. Failure to hold the support will accentuate further selldown to RM0.485 (12 Jan 2015 low).
  • Outlook will turn positive if share prices swiftly reclaim RM0.67. On the other hand, Sendai’s near term technical outlook will only turn positive if share prices can stage a strong relief rally to quickly reclaim above 30-d SMA at RM0.67, which will lift prices higher towards long term target at RM0.745 (200-d SMA).

Source: Hong Leong Investment Bank Research, 06 June 2016

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