Fajarbaru upgraded to 'outperform' by RHB

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD

Research House: RHB

Price Call: BUY

Target Price: 1.10

RHB Research upgraded Fajarbaru Builder Group Bhd to
'outperform' with a higher fair value of RM1.10 per share following the latter's fifth key construction contract win this fiscal year ending June 30, 2012 (FY2012).

The broker raised Fajarbaru's FY2013-2014 net profit forecasts by 11-15 per cent, having reflected 668 million new jobs in FY2012 as compared with 368 million a year earlier.

"Fajarbaru's valuations have become attractive after the latest earnings upgrade," RHB said in a research note today.

The company announced on Thursday it secured a 299.8 million contract to construct and commission the depot and power substation for the Malaysia's Ampang light rail transit extension project.

By 9.27am, Fajarbaru's shares climbed 0.53 per cent, outperforming the Malaysia's benchmark stock index that rose 0.22 per cent. - Reuters

RHBInvest Research Highlights 18th January 2012

Stock Name: IJM
Company Name: IJM CORPORATION BHD

Research House: RHB

Price Call: SELL

Target Price: 4.48

Stock Name: TENAGA
Company Name: TENAGA NASIONAL BHD

Research House: RHB

Price Call: HOLD

Target Price: 6.50

Stock Name: AXREIT
Company Name: AXIS REITS

Research House: RHB

Price Call: HOLD

Target Price: 2.72

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD

Research House: RHB

Price Call: HOLD

Target Price: 0.86

Stock Name: MBMR
Company Name: MBM RESOURCES BHD

Research House: RHB

Price Call: BUY

Target Price: 3.90

Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 4.40

Stock Name: UMW
Company Name: UMW HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 6.20

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 4.30

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 5.50

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: RHB

Price Call: HOLD

Target Price: 2.20

18th January 2012

 

Top Story

IJM Corp ' Kajang- Seremban Highway not living up a cash cow                                  Underperform Company Update -          FY03/12-14 net profit forecasts are trimmed by 3% p.a., having imputed share of RM20m net loss p.a. from Lekas. Fair value reduced by 2% from RM4.59 to RM4.48. Maintain Underperform. -          Related story : IJM Corp Results/Briefing Note ' 1HFY03/12 Core Net Profit Grows 11% YoY, Slight Delays In WCE and NPE Extension (29 Nov 2011)

Sector Update

Motor ' A better 2012                                                                                                Underweight Sector Update MBM Resources ' Fair value RM3.90                                                                           Outperform Tan Chong ' Fair value RM4.40                                                                             Market Perform UMW ' Fair value RM6.20                                                                                        Underperform APM ' Fair value RM4.30                                                                                       Market Perform Proton ' Fair value RM5.50                                                                                   Market Perform DRB-HICOM ' Fair value RM2.20                                                                           Market Perform -          MAA (Malaysian Automotive Association) guidance is for Jan 2012 vehicle sales to improve slightly given ongoing promotional campaigns and the seasonal rush to deliver new vehicles ahead of the Lunar New Year holidays. We are revising our 2012 TIV forecast to 612,000 units (+2% yoy) from 607,000 units on the back of RHBRI's 3.6% GDP growth forecast and 5.3% rise in consumption spending. -          Related story: Motor Sector Update  ' Seasonal Slump And Floods Hit Sales (20 Dec 2011)

Corporate Highlights

TNB ' On recovery path                                                                                         Market Perform Results / Briefing Note -          FY12 core earnings forecast raised by 22% after imputing an additional 50 mmscfd of gas to be received by TNB beginning Mar. Fair value revised to RM6.50 (from RM6.15) based on unchanged target CY12 PER of 15x.  Maintain Market Perform. -          Related story: TNB Results Preview  ' Slight improvement in 1Q (16 Jan 2012)   Axis REIT ' More asset acquisitions in the pipeline                                                 Market Perform Briefing Note -          Axis REIT is currently looking at 11 potential assets totalling RM545m that could be injected into the REIT over the next 2 years, with half targeted to be acquired by end-2012. -          Our EPS forecasts have been revised slightly by 0.8-1.1% for FY12-14 after we factor in lower interest expenses. We raise our fair value slightly to RM2.72 (from Rm2.70) after revising our FY12 DPU estimates. Maintain market Perform. -          Related stories: Axis REIT 4Q11 Results Note ' Total DPU of 17.2 sen for FY11 (17 Jan 2011); Axis REIT News Update ' Acquisition in Bayan Lepas (27 Oct 2011); Axis REIT News Update ' New Acquisition in Penang (29 Sep 2011)   Fajarbaru ' Completes private placement of 15m new shares at RM0.90/share         Market Perform Company Update -          Fajarbaru has completed a private placement of 15m new shares at RM0.90 per share.  -          The RM13.5m gross proceeds from the exercise will increase its net cash of RM24.2m as at 31 -          Fair value is reduced by 5% from RM0.91 to RM0.86.  Maintain Market Perform. -          Related story: Fajarbaru News Update  ' Lands RM62m Sewerage Treatment Plant Job In Selangor (22 Dec 2011)

Fajarbaru rises on RM166.4m medical suite job

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD

Research House: RHB

Price Call: BUY

Target Price: 1.13

KUALA LUMPUR: Fajarbaru Builder Group Bhd shares rose on Wednesday, Oct 19 after it secured a RM166.4 million contract for the CONSTRUCTION [] of Ampang 210 Medical Suite in KL.

At 9.52am, Fajarbaru added four sen to 96 sen with 14,000 shares done.

The company said on Oct 18 that its unit Fajarbaru Builder Sdn Bhd would jointly undertake the project with Aztabina Sdn Bhd.

RHB Research in a note Oct 19 said that this was the first key contract Fajarbaru had secured in FY06/12, boosting its outstanding construction orderbook by 32% from RM524 million to RM690 million.

Assuming EBIT margin of 8-10%, the contract will fetch RM13.3 million-RM16.6 million EBIT over the construction period, said the research house.

'Forecasts maintained as we have assumed Fajarbaru to secure RM250 million worth of new jobs in FY06/12.

'Fair value is RM1.13.'' Maintain Outperform,' it said.

Construction: More bang for the buck in small caps

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD

Research House: RHB

Price Call: BUY

Target Price: 1.80

Construction sector
Maintain neutral: Over the immediate term, we expect construction stocks in general to perform only in line with the broader market due to 'news-flow fatigue'. We believe the market wants to see more substantive progress on the MRT project, not merely 'symbolic' moves such as the July 8 groundbreaking ceremony.

However, we believe there is still money to be made from small-cap construction stocks as it has become increasingly clear that: (i) smaller contractors can beat larger players in the battle for key packages of large-scale projects; (ii) they stand much better chances in winning new contracts thanks to their lean setup; and (iii) their attractive valuations vis-''-vis those of the larger players.

The lean setup of smaller players allows them to profitably execute: (i) certain smaller public jobs (worth RM50 million to RM100 million) that large players normally shy away from due to the lack of economies of scale to them; and (ii) sub-contracts of key large-scale projects. Given the massive scale of some of the proposed public infrastructure projects, particularly, the LRT line extension and MRT, we expect the local construction market to be awash with small sub-contracts.

We are raising our indicative fair values for Fajarbaru Builder Group Bhd, Gamuda Bhd, Hock Sin Leong Group Bhd (HSLG), TRC Synergy Bhd (TRCS) and WCT Bhd by 2% to 17%, while trimming those of IJM Corp Bhd and Malaysian Resources Corp Bhd (MRCB) by 2% to 3%, having rolled forward the base year for valuation purposes from 2011 to 2012. We make no changes to our stock recommendations ' 'outperform' for Fajarbaru, HSLG and TRCS; 'trading buy' for MRCB; 'market perform' for Gamuda; and 'underperform' for IJM and WCT.

Risks include: (i) the government reverting to an austerity drive to rein in the budget deficit; (ii) potential hiccups in the rollout of public projects; and (iii) the less-than-robust overseas construction markets, particularly, the Gulf states.

We are neutral on the construction sector, but bullish on small caps. We see a bright spot in small-cap builders due to: (i) their ability to win key work packages of large-scale projects; (ii) their better chances of winning smaller contracts and subcontracts of large-scale projects; and (iii) their attractive valuations. Our top small-cap picks for the construction sector are Fajarbaru (fair value: RM1.80) and TRCS (FV: RM2.26). ' RHB Research, June 28


This article appeared in The Edge Financial Daily, June 29, 2011.

FAJAR - CIMB Research has Sell on Fajarbaru Builder

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research has a SELL on Fajarbaru Builder Group at RM1.16 and the share price is trading at a price-to-book value of 1.3 times.

It said on Monday, April 25 Fajarbaru is gyrating in a bearish flag pattern, which is usually perceived as a downward reversal pattern. Although prices could still bounce a tad higher from here, sustainability is a key concern as momentum should turn weaker near the resistance level.

MACD is flat while RSI is beginning to dwindle. Near term gains are likely capped at RM1.20-RM1.25.

'Traders may want to unload some position near the stipulated resistance zone. Others should sell when prices break below its 200-day SMA at RM1.08. Next downside targets are RM1.02 and 95 sen,' it said.

FAJAR - Big time for small-cap construction outfits

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD
Research House: RHB

Construction sector
Maintain neutral: While large construction companies are conventionally good proxy plays to the new wave of infrastructure spending in Malaysia, it appears that the little guys, small-cap construction players, have thus far dominated the winners' lists of the key work packages of the Kuala Lumpur International Airport 2 (KLIA2) and the Ampang and Kelana Jaya LRT line extension project.

The smaller players stand a much better chance of winning new contracts thanks to lean setups that enable them to profitably execute smaller public jobs that larger players shy away from, as well as subcontracts of key large-scale projects that will soon flood the local construction market.

Based on the last traded prices, small-cap construction stocks Fajarbaru Builder Group Bhd and TRC Synergy Bhd now trade at 7.9 to 10 times and 7.5 to 8.6 times FY11/12 earnings, at a fairly substantial discount to 16.4 to 20.6 times and 16 to 19.1 times earnings for large-cap construction companies Gamuda Bhd, IJM Corp Bhd and WCT Bhd. We believe the large discount is unjustified and untenable.

Risks to our view include: (i) the government reverting to an austerity drive to rein in the budget deficit; (ii) the potential of hiccups in the rollout of the public projects; and (iii) less than robust overseas construction markets, particularly, the Gulf states.

We are neutral on the construction sector, but bullish on small-caps. Over the immediate term, we expect construction stocks in general to perform only in line with the broader market due to 'news flow fatigue'. However, we do see a bright spot in small-cap builders due to their ability to win key work packages of large-scale projects, their better chances of winning smaller contracts and subcontracts of large-scale projects, and their attractive valuations.

Our top small-cap picks are Fajarbaru (fair value: RM1.65) and TRC (FV: RM1.94). An added downside cushion to their share prices is their strong balance sheets with a net cash of RM118.8 million or 69 sen per share for Fajarbaru, and net cash of RM200.3 million or RM1.05 per share for TRC as at Dec 31. ' RHB Research, April 4


This article appeared in The Edge Financial Daily, April 5, 2011.

FAJAR - RHB Research maintains Fajarbaru FV at RM1.37 and Outperform call

Stock Name: FAJAR
Company Name: FAJARBARU BUILDER GRP BHD
Research House: RHB

KUALA LUMPUR: RHB Research said on Monday, March 7 it is maintaining a fair value of RM1.37 and Outperform call on Fajarbaru Builder Group Bhd after it was appointed by Syarikat Prasarana Negara Bhd as the nominated sub-contractor for the light rail transit (LRT) extension projects.

Fajarbaru has been appointed to carry out the CONSTRUCTION [] of Stations 1 & 2 of Ampang LRT line extension project (Package A) valued at RM62.7m and Stations 1, 2 & 3 of Kelana Jaya LRT line extension project (Package A) valued at RM87.4m.

'These contracts have boosted Fajarbaru's YTD new contracts secured to RM249m and outstanding construction orderbook by 30% from RM496m to RM646m.'' Assuming an EBIT margin of 8%, the two contracts will fetch RM12m EBIT over the construction periods of 21 months.

'Forecasts maintained as we have assumed Fajarbaru secures RM250m worth of new jobs p.a. in FY11-12. Maintain fair value of RM1.37 and Outperform call,' RHB Research said.