The US labour market showed signs of a steady slowdown in October, with job openings increasing moderately and layoffs declining, according to the latest Job Openings and Labor Turnover Survey (JOLTS) report released by the Bureau of Labor Statistics on Tuesday. Job openings, a key indicator of labour demand, rose by 372,000 to 7.744 million at the end of October. However, the September figures were revised downward to 7.372 million from the initially reported 7.443 million. Economists polled by Reuters had anticipated 7.475 million vacancies. Labour Market Dynamics While job openings increased, hires dropped by 269,000 to 5.313 million, and layoffs fell by 169,000 to 1.633 million. These figures suggest a gradual cooling of the labour market rather than a sharp contraction. Hurricanes and strikes also impacted October’s labour market data. Rebuilding efforts in storm-affected regions and the resolution of strikes at Boeing and another aerospace company are expected to contribute to a ...
Maintain Buy call with lower Target Price (TP) of
RM0.90 (+29%)
 |
| Eversendai Corp |
Strong job win
momentum to continue
Following strong job wins in 2015, the momentum would
continue in 2016 especially from Middle East and Malaysia. Variation order
claim is expected to pick up in 2016, providing upside to our earnings
forecasts. The pick up in job flows from key global events in the Middle East
would re-rate the stock. Post earnings forecasts adjustments, we maintain BUY
on Eversendai with a lower MYR0.90 TP (-10%) based on 12x 2017 PER.
Potential job wins
from ME and Malaysia
Eversendai’s 2015 record high job wins of MYR1.73b was
mainly from Middle East (64% of total) and 65% consisted of structural steel
works. In 2016, Eversendai would continue tendering actively in Middle East and
Malaysia but would tender selectively in India. The major events including
World Expo 2020 in Dubai and World Cup 2022 in Qatar would continue to drive
construction jobs in the Middle East. Locally, it could benefit from RAPID, KL118
Tower and upcoming power plant works.
More variation order
claims in 2016
Management guided its normalised 2015 net margin should be
~5% (vs. 3.1% reported net margin) due to revision of its variation orders
value. Outlook for its margins remains challenging due to competition and lack
of iconic project works. Positively, it has started variation orders claim on
the Qatar National Museum project in 2015 and expects further claims from Qatar
and the Tanjong Bin power plant project in 2016.
Revising earnings
forecasts
We incorporate the higher-than-expected 2015 job wins (vs.
our earlier forecast of MYR1.5b) but we revise down our margin assumptions.
Subsequently, we reduce our 2016/17/18 EPS estimates by -8%/-10%/-7%. Our new
TP is MYR0.90 (-10%) after we roll forward our valuation to 2017 EPS based on
an unchanged 12x PER. Key re-rating catalyst would emanate from accelerating
job awards from the Middle East as the construction for the major events goes
into full swing. Maintain BUY.
Source: Maybank IB Research, 04 March 2016
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