Eversendai Corporation Berhad

My apology that I made a mistake by posting a non-relevant article just now. Anyway, I did a thorough study on SENDAI last week and would like to share with you all.

If you are paying attention on this SENDAI lately, it is falling from high point of RM1.70 in mid July till the lowest point of RM0.995 as of today, more than 40% price slides. Do you think it is undervalue or oversold now?

From the look at this counter, it LOOKS LIKE undervalue, even the owner himself told us so and perhaps you can make some free lunches by investing into SENDAI

However, I decided not to invest any of my hard earn money into SENDAI last minute. This is because I'm quite sceptical about what the owner of SENDAI told the investors over the past few months.

Reason 1:
The owner told us that SENDAI's share is undervalue when it's about RM1.x at 1 to 2 months ago, and he told the reporters that he have already appointed 1 or 2 investment banks to do share buy-back. It has done once only, and that's it. Until today, there is no further share buy-back from SENDAI even the share price has dropped further to RM0.995.

Reason 2:
In early April 2013, he claimed that the company earning is so strong but the share price is undervalue. He also plans to double the revenue (RM2 billions) within 5 years. That's a very strong confidence given to shareholders. However, the share price immediately plunged to historical low of RM1.04 after that.

And in mid June 2013, he claimed that the 2013 earning will be robust. However, after the released of the poorer result in end Aug 2013, he re-claimed that the certain art of the projects are complicated and thus customers requested for variation orders. The missing profit can only be brought in by 2H14. Hence, he claimed that 2014 result will be definitely the best ever. Please bear in mind the quarterly report is for 2nd quarter, from April to June 2013. What did he tell again in mid June 2013?

Reason 3:
SENDAI is doing steel structure on building, where not every building require it. So it can experience hard time if there is less steel structure building to be built. As usual, all the projects have to go through formal tender process. So the risk to win project with less margin also have to factor in as well. Furthermore, it is quite heavily rely on middle east market.

Reason 4:
The margin is depressed according to the recent quarters' result. I don't understand much about the competition. However, the owner claimed that the clients normally look for them automatically. This should be able to dominate the market with reasonable margin. But it seems like their market is only covering Middle East so far.

Reason 5:
The owner told the reporters there are few giant projects coming in 4Q13, but we have yet to see any. Now he told that they have been deferred to 1Q or 2Q14. We will have to wait further.

Reason 6:
I don't feel good guts about the management team. From the way the owner talks in the annual reports and in front of reporters, it made me recalled another Indian ex-owner from Masterskill Education Group Bhd. You will understand what am I trying to tell if you read up both annual reports and look at where is MEGB today.

Reason 7:
Low dividend yield compared to other more attractive company, like MUDAJYA.

On the other hand, I hope I'm wrong because the owner owns more than 70% share price and he did not dispose any of them up to today. Furthermore, the entry into oil and gas steel structural business perhaps is a positive move for the company for business expansion. Just that they acquire Technics at very expensive price due to the need for JV to bid for a tender.

If what the owner told is true and everything is smooth, 2H14 will be the time for SENDAI to shine. If this is the case, I'm sure SENDAI is heavily undervalue and it's worth to invest now. But I prefer to invest my money for other counter for now, due to my reasons given above. In the end of the day, I'm too concern about the management's integrity.

SENDAI is currently trading at:
Price - RM0.995 / PER 6.1 / D/Y 2% / Net Cash
The reasonable price will be RM1.65 based on PER 10.0.

Ops, it's 12.50am now. Happy Chinese New Year, folks!

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