Stock Name: FABER
Company Name: FABER GROUP BHD
Research House: RHB
Faber Group Bhd
(April 11, RM2.14)
Maintain outperform at RM2.24 with target price RM2.79: According to news reports over the weekend, Khazanah Nasional plans to sell its healthcare support concessions, valued at around RM150 million, to focus on its core healthcare services business.
Recall our Nov 6, 2009 report in which we had raised the possibility that Faber could be one of the bidders. In that report we highlighted why it would make sense: (i) Synergies ' We believe there would be synergies and cost savings if there is a merger between the two concessionaires, in terms of procurement of materials and manpower, HQ support services and even laundry and medical waste treatment and disposal facilities; and (ii) Competitive landscape unaffected ' The current industry structure is driven not by competition but by service benchmarks, and these are continuously audited by external consultants. Therefore a merger of two concessionaires would not imply less competition.
Although there is less than a year left to the end of the hospital support services concession, we are confident that the government will renew it, similar to the renewal of Pharmaniaga's medical supply concession this year. Moreover, Faber has consistently met or exceeded service benchmarks without raising service fees over the last 14 years.
Risks to our view include: (i) a failure to secure an extension to the concession agreement with the government; and (ii) delays in property launches and approvals, which could affect revenues from the property segment.
Our earnings projections remain unchanged and we maintain our fair value of RM2.79 (based on sum-of-parts valuation). Our forecast and fair value estimate do not include Pantai Medivest, but we believe Faber stands a good chance of acquiring it given its strong financial position and good track record. We reiterate our 'outperform' call on the stock. ' RHB Research, April 11
This article appeared in The Edge Financial Daily, April 12, 2011.
Company Name: FABER GROUP BHD
Research House: RHB
Faber Group Bhd
(April 11, RM2.14)
Maintain outperform at RM2.24 with target price RM2.79: According to news reports over the weekend, Khazanah Nasional plans to sell its healthcare support concessions, valued at around RM150 million, to focus on its core healthcare services business.
Recall our Nov 6, 2009 report in which we had raised the possibility that Faber could be one of the bidders. In that report we highlighted why it would make sense: (i) Synergies ' We believe there would be synergies and cost savings if there is a merger between the two concessionaires, in terms of procurement of materials and manpower, HQ support services and even laundry and medical waste treatment and disposal facilities; and (ii) Competitive landscape unaffected ' The current industry structure is driven not by competition but by service benchmarks, and these are continuously audited by external consultants. Therefore a merger of two concessionaires would not imply less competition.
Although there is less than a year left to the end of the hospital support services concession, we are confident that the government will renew it, similar to the renewal of Pharmaniaga's medical supply concession this year. Moreover, Faber has consistently met or exceeded service benchmarks without raising service fees over the last 14 years.
Risks to our view include: (i) a failure to secure an extension to the concession agreement with the government; and (ii) delays in property launches and approvals, which could affect revenues from the property segment.
Our earnings projections remain unchanged and we maintain our fair value of RM2.79 (based on sum-of-parts valuation). Our forecast and fair value estimate do not include Pantai Medivest, but we believe Faber stands a good chance of acquiring it given its strong financial position and good track record. We reiterate our 'outperform' call on the stock. ' RHB Research, April 11
This article appeared in The Edge Financial Daily, April 12, 2011.
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