Results Update

Faber has just announced its results for QE28/2/2010 and it is a HUGE DISAPPOINTMENT! Even though, the results was an improvement over the results of the previous corresponding quarter, it was substantially lower than the immediate preceding quarter, with net profit lower by 66% to RM14.4 million & turnover lower by 39%.


Table 1: Faber's last 10 quarterly results

Now, we learned that the big jump in the immediate preceding quarter, QE30/11/2009 was attributable to the higher revenue from Integrated Facilities Management ('IFM') Concession which was mainly due to one-off revenue received from hospital for the claim for linen loss. In addition, it has completed a IFM maintenance contract secured earlier (see Table 2 for Note 20). In the absence of these two factors, Faber's top-line & bottom-line dropped in QE28/2/2010. None of these exceptional items were explained in the Notes accompanying the results for QE30/11/2009 (see Table 3 for Note 21). In fact, if one were to read Note 22 for QE30/11/2009, you would get a very bullish impression of the future prospect of Faber because the note insinuated the improvement was sustainable due to higher revenue from the new business in UAE & higher bed occupancy plus additional new facilities in government's hospital (see Table 3 for Note 22).

Incomplete disclosure of this nature reflects badly on the professionalism of Faber's management.


Table 2: Faber's q-o-q changes for QE28/2/2010 explained


Table 3: Faber's q-o-q changes for QE30/11/2009 'explained'


Table 4: Faber's q-o-q changes for QE30/11/2009- further explanation?


Chart 1: Faber's 13 quarterly results

Valuation

Assuming that Faber's results for QE28/2/2010 can be maintained for the next 3 quarters, its full-year EPS would be about 16 sen. Based on its closing price of RM2.26 yesterday, Faber is trading at a forward PER of 14 times. The stock is fully valued. Faber should trade at a PER of no more than 13 times, a discount of at least 15% to market- due to its poor professionalism.

Technical Outlook

The stock may find support at the 10-week or 20-week SMA lines at RM2.18 or RM1.97. If these support failed, it could test the strong horizontal support at RM1.75.


Chart 2: Faber's weekly chart as at May 5, 2010 (Source: Quickcharts)

Conclusion

Based on the above, Faber is rated a SELL on strength.