1. Margin
An article in Star newspaper dated 6 April 2013
PATAMI
margin of 11% seems to be a thing in the past after he made that
statement in April 2013. PATAMI margin has been below 4% since 2013.
2. RM2b Revenue
(The Edge)
The actual revenue recorded in 2016 was RM1,582.4m, below his target of RM2b.
3. Serious Delay in the Completion of Liftboats
In
May 2014, Eversendai secured a contract to construct two liftboats. The
liftboats were supposed to be ready by February and May 2016. However,
to date, none of them has been completed. It probably takes about double
the original contract period to complete the works. Whether the delay
is caused by the client (related party transaction, a vehicle controlled
by Tan Sri AK Nanthan) or Eversendai? And whether Eversendai would be
compensated if the delay is caused by its client? Substantial overrun in
overhead costs is likely given the prolonged delay.
4. Over-promise, under-deliver
Another
blemish in the company was the bad investment in Technics Oil & Gas
in which the company incurred more than RM100m of losses.
Conclusion
I
would avoid the stock as it is not a stock that I could buy and sleep
soundly at night given its track records and erratic earnings. There are
more than 800 counters in Bursa Malaysia and I am sure there are some
stocks that offer more attractive risk reward ratios. Furthermore, the
stock is not cheap at current valuation, having high net gearing of 1
time (before private placement), and considering the payment risk
associated with the liftboat project. Besides, decent dividend is
unlikely in the foreseeable future due to its high gearing ratio.
While
I have reservation on the stock, credit must be given to Tan Sri AK
Nathan for his incredible track records in successfully completing
various world class iconic projects.
http://klse.i3investor.com/blogs/bursastocktalk/130140.jsp
http://klse.i3investor.com/blogs/bursastocktalk/130140.jsp
