March 18, 2011

FABER - OSK Research maintains Trading Buy on Faber, unch TP RM3.02

Stock Name: FABER
Company Name: FABER GROUP BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining a Trading Buy on FABER GROUP BHD [] at an unchanged target price of RM3.02 based on SOP valuation.

The research house said on Friday, March 18 that it still thinks'' Faber should be able to get its existing concession renewed in view of its track record and excellent execution of the existing concession, which should provide the upward catalyst for its share price.

On Thursday, Faber announced a capital reduction by way of cancellation of 75 sen of the existing par value of each RM1 ordinary share, and ii) a share premium reduction of RM116m to reduce the accumulated losses in Faber Group.

'The proposals came in as no surprise given that we had mentioned in our last March 16 report that Faber was in the midst of finalising proposals to strengthen its balance sheet, largely with regard to 'legacy' accumulated losses at the company level.

'As we had mentioned earlier, despite the company's willingness to pay a higher dividend payout, its ability to increase the payout ratio had been constrained by its accumulated losses at the company level,' it said.

OSK Research said the main rationale for the proposed corporate exercise is to enable Faber to beef up its capacity to raise its dividend payout and provide higher dividend returns to its shareholders.

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