Stock Name: FABER
Company Name: FABER GROUP BHD
Faber Group Bhd
(Aug 24, RM1.80)
Maintain buy at RM1.79 with target price of RM3: Faber's 2QFY11 net profit grew commendably by +16.6% quarter-on-quarter (q-o-q) to RM16.5 million. The negative year-on-year number (-49.1% y-o-y) was not comparable as a result of the non-renewal of infrastructure and low-cost houses maintenance contracts in UAE. Net earnings for 1HFY11 were RM30.7 million, accounting for 40.4% of our full-year figure. We consider this within our estimate as we expect higher property division contribution, continued growth in government hospital support services (HSS) and sustained profit margins in 2HFY11. As such, we are keeping our FY11 profit forecast.
Faber's 2QFY11 revenue declined 5.9% q-o-q to RM186.4 million, weighed down by lower contribution from the integrated facilities management (IFM) non-concession division. However, pre-tax earnings were higher (+12.3% q-o-q to RM28.8 million), lifted by higher property and IFM concession businesses contribution, and overall better margin (+2.5 percentage points to 15.4%). The property division's revenue surged 70.5% y-o-y or 64.5% q-o-q to RM35 million in 2QFY11 due to higher progress billings for the projects in Kepong, Taman Desa and Kota Kinabalu. We believe that new launches of Villa Prima Phase 1A (gross development value [GDV] of RM148 million) in February 2011 also contributed positively to the company's top line. In addition, the IFM concession segment recorded higher revenue at RM137.2 million (+4.9% y-o-y or +0.8% q-o-q).
This was attributed to higher orders and additional facilities at the government hospitals within Faber's concession area.
Faber is likely to secure the HSS concession renewal, supported by the company's proven track record, technical expertise, sound management and government-linked status. Most importantly, following the clinical waste mishandling by an HSS provider (refer to our report dated Aug 2, 2011), Faber's operational integrity offers the company a strong competitive edge against its competitors. Factoring in all aspects, we reaffirm our view that Faber's government HSS concession expiring October 2011, will be extended. Hence earnings visibility for another 15 years. The management indicated that the concession agreement is still pending a decision by the Health Ministry. We expect the property segment to perform well, driven by: (i) Laman Rimbunan Phase 4 and 5 package 3 (estimated GDV of RM100 million and expected launch date in 3Q11); and (ii) mid to high-end condominium located on a 1ha plot of land in Jalan Gurney, Kuala Lumpur (estimated GDV of RM197 million and expected launch date in September). We gather that current GDV and unbilled sales as at March 2011 were still healthy at about RM566 million and RM420 million.
We reiterate our 'buy' recommendation on Faber supported by our firm view that Faber's government HSS concession will be renewed. Our target price for Faber is unchanged at RM3 based on sum-of-parts valuation, implying 14 times 2011 price-earnings ratio (PER). Faber is currently trading at 8.6 times FY11 earnings per share with estimated 3.5% dividend yield. We like Faber's cash rich position with a war chest of RM158 million or 43.5 sen net cash per share (1QFY11: 39 sen). Ex-net cash, the company is currently trading at an undemanding 6.5 times 2011 PER. ' MIDF Research, Aug 24
This article appeared in The Edge Financial Daily, August 25, 2011.
Company Name: FABER GROUP BHD
| Research House: MIDF | Price Call: BUY | Target Price: 3.00 |
Faber Group Bhd
(Aug 24, RM1.80)
Maintain buy at RM1.79 with target price of RM3: Faber's 2QFY11 net profit grew commendably by +16.6% quarter-on-quarter (q-o-q) to RM16.5 million. The negative year-on-year number (-49.1% y-o-y) was not comparable as a result of the non-renewal of infrastructure and low-cost houses maintenance contracts in UAE. Net earnings for 1HFY11 were RM30.7 million, accounting for 40.4% of our full-year figure. We consider this within our estimate as we expect higher property division contribution, continued growth in government hospital support services (HSS) and sustained profit margins in 2HFY11. As such, we are keeping our FY11 profit forecast.
Faber's 2QFY11 revenue declined 5.9% q-o-q to RM186.4 million, weighed down by lower contribution from the integrated facilities management (IFM) non-concession division. However, pre-tax earnings were higher (+12.3% q-o-q to RM28.8 million), lifted by higher property and IFM concession businesses contribution, and overall better margin (+2.5 percentage points to 15.4%). The property division's revenue surged 70.5% y-o-y or 64.5% q-o-q to RM35 million in 2QFY11 due to higher progress billings for the projects in Kepong, Taman Desa and Kota Kinabalu. We believe that new launches of Villa Prima Phase 1A (gross development value [GDV] of RM148 million) in February 2011 also contributed positively to the company's top line. In addition, the IFM concession segment recorded higher revenue at RM137.2 million (+4.9% y-o-y or +0.8% q-o-q).
This was attributed to higher orders and additional facilities at the government hospitals within Faber's concession area.
Faber is likely to secure the HSS concession renewal, supported by the company's proven track record, technical expertise, sound management and government-linked status. Most importantly, following the clinical waste mishandling by an HSS provider (refer to our report dated Aug 2, 2011), Faber's operational integrity offers the company a strong competitive edge against its competitors. Factoring in all aspects, we reaffirm our view that Faber's government HSS concession expiring October 2011, will be extended. Hence earnings visibility for another 15 years. The management indicated that the concession agreement is still pending a decision by the Health Ministry. We expect the property segment to perform well, driven by: (i) Laman Rimbunan Phase 4 and 5 package 3 (estimated GDV of RM100 million and expected launch date in 3Q11); and (ii) mid to high-end condominium located on a 1ha plot of land in Jalan Gurney, Kuala Lumpur (estimated GDV of RM197 million and expected launch date in September). We gather that current GDV and unbilled sales as at March 2011 were still healthy at about RM566 million and RM420 million.
We reiterate our 'buy' recommendation on Faber supported by our firm view that Faber's government HSS concession will be renewed. Our target price for Faber is unchanged at RM3 based on sum-of-parts valuation, implying 14 times 2011 price-earnings ratio (PER). Faber is currently trading at 8.6 times FY11 earnings per share with estimated 3.5% dividend yield. We like Faber's cash rich position with a war chest of RM158 million or 43.5 sen net cash per share (1QFY11: 39 sen). Ex-net cash, the company is currently trading at an undemanding 6.5 times 2011 PER. ' MIDF Research, Aug 24
This article appeared in The Edge Financial Daily, August 25, 2011.
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