Posted on 09 Dec 2015
Eversendai Corp Bhd, which recently proposed to acquire a power plant contractor in Thailand, has set its sights on acquiring assets in Indonesia.
Executive chairman and group MD Tan Sri AK Nathan said the firm is seeking companies in Indonesia that can complement its steel fabrication and power plant businesses.
“We expect Indonesia to host some big infrastructure projects as well as construction of power plants. Thus, it would be viable for us to find a partner there.
“This is in line with our expansion plans in the South-East Asian and Middle East markets,” he told The Malaysian Reserve recently.
Last week, Eversendai announced it is acquiring a 70% stake in S-Con Engineering Co Ltd — a steel fabricator and plant contractor — for RM3.5 million.
The acquisition would enable Eversendai to bid for projects involving steel, composite structures, power and petrochemical plants, and infrastructure in Thailand and neighbouring countries.
Eversendai can also capitalise on S-Con Engineering’s track record to grow and strengthen its present relationship with its international clients. Nathan said Thailand and Indonesia have lined up plans to build power plants in the next few years, opening up opportunities for Eversendai.
“We are not only focusing on plant construction but expanding our core business in structural steel fabrication in both countries,” he said. Nathan said Eversendai is on track to achieve its RM2 billion turnover target by 2017.
“At the end of this year, the company’s revenue would surpass the RM1.5 billion mark,” he said.
Nathan, also Eversendai founder and major shareholder, said improving profit margins will be the company’s main focus to match the substantial earnings growth.
“Margins are not compressed because businesses are good but we had some costs for the past three years which reflected in a huge gap between revenue and profit.
“While the revenue growth has been well planned and on track, now I am focusing on profit growth. From next year, you can see better numbers,” he said.
Nathan expects that 2016 would be a better year as many projects are expected to be dished out in its key markets such as the Middle East, India and Malaysia.
The company is optimistic on securing some of the jobs based on its expertise and track record.
Eversendai posted a fourfold increase in net profit to RM14.58 million for the third-quarter ended Sept 30, 2015, compared to RM2.1 million posted a year ago, driven by higher margins from its present projects.
Revenue also improved to RM471.5 million from RM241 million a year ago.
It was driven by its Middle East operations, which accounted for 70% of its total revenue, the steel power plant projects in Malaysia contributing 20.8% while the construction industry in India added another 9.2%.
As at September 2015, the group had secured approximately RM1.4 billion in new contracts and its orderbook stood at RM1.8 billion.
The company has over 20 ongoing projects. The S-Con Engineering purchase proposal however did not excite the market, as Eversendai’s share price dwindled to close at 84 sen last Tuesday (the day the venture was announced), 2.5 sen lower than the previous close at 86.5 sen. Some 3.74 million shares exchanged hands last Tuesday.
Asked on the company’s stock performance, Nathan said: “I seriously cannot understand the market. Now I don’t even bother to look at it because it does not reflect the company’s fundamentals.
“I would rather concentrate on my core businesses and prove via numbers. Of course share price is very crucial for a company because I want to give good returns.
“Furthermore, I am the major shareholder, so it is more frustrating. But what I know is the market is very volatile and is beyond my intelligence.”
Eversendai was listed on July 1, 2011, with a final institutional price of RM1.70 and retail price of RM1.62. On listing day, Eversendai closed at RM1.72.
The share price reached its peak of RM1.80 on Aug 4, 2011, and has been on a downtrend since then. In the last 52 weeks, Eversendai’s share price was hovering between 49.5 sen and RM1.03, while the average price target by fund managers and analysts stood between 83 sen and RM1.18.
