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

Faber Group Bhd
(July 30, RM2.79)
Maintain outperform at RM2.82 with fair value of RM3.54: Faber is expected to announce its 2QFY10/12 results on Aug 5. We believe 2Q net profit could be higher year-on-year (y-o-y) due to stronger contributions from both concession and non-concession integrated facilities management (IFM) businesses, while quarter-on-quarter (q-o-q), net profit is expected to be better thanks to higher contribution from its overseas IFM business.

Faber recently secured a contract with Abu Dhabi Health Services Company to maintain all mechanical systems and equipment and various electrical installations and fittings at Sheikh Khalifa Medical City (Main Campus) and affiliated buildings in Abu Dhabi. The project is worth approximately RM20.4 million for a three-year period starting from Aug 16, 2010. We also note that an IFM contract in Madinat Zayed, Abu Dhabi, was renewed in May for another year with an annual value of RM57.8 million, while a second contract (likely to be more than RM100 million), also in Madinat Zayed, is expected to be renewed by year-end.

Faber's local non-concession IFM business is also expanding -' the company recently secured contracts worth approximately RM7 million per annum from various vendors that include Tesco, RapidKL and private healthcare companies.

As for the property segment, we expect stronger property earnings to come onstream in 2HFY10 following the recognition of earnings from the launch of Taman Desa Phase 1A DBKL in May. The company received a good response from the public, and over 60% of the development has been sold. It plans to launch Phase 1A (Fleet) at Taman Desa as well as Phase 4 for the Laman Rimbunan development in Cheras by 3Q10.

Risks in our view: (i) Failure to secure an extension to the concession agreement with the government; and (ii) Further delays in property launches and approvals, which could affect revenues from the property segment.

We have kept our FY10/12 earnings forecasts for now.

We continue to like Faber for its resilient earnings derived from the concession business, together with its ongoing expansion plans for its non-concession business both locally and overseas. Indicative fair value of RM3.54, which is based on sum-of-parts valuation, is maintained. We reiterate our outperform call on the stock. ' RHB Research Institute Sdn Bhd


This article appeared in The Edge Financial Daily, August 2, 2010.