Faber Group

kltrader

Publish date: Wed, 11 Aug 2010, 12:59 PM

Target RM3.58

Faber?s 1HFY10 results were within our and consensus expectations, with revenue and net profit accounting for about 48.5% of our full-year forecast for FY10. Revenue and net profit for 1HFY10 surged 45.9% and 121.9% y-o-y on robust performance by its IFM division, particularly its IFM contracts in UAE. As such, we maintain our forecast and BUY recommendation at an unchanged TP of RM3.58, based on a SOP valuation. Despite the steep share price appreciation YTD, at 10.5x PER on FY10 EPS, Faber still offers an attractive valuation proposition, underscored by its strong fundamentals and future growth prospects.

As expected. For 1HFY10, Faber reported revenue and net profit of RM454.2m and RM46.9m respectively which were within our expectation, accounting for 48.5% of our revenue and net profit forecasts for FY10. Revenue jumped 46.9% y-o-y while net profit surged more than 121.9% y-o-y. The strong revenue growth y-o-y was attributed to the higher contribution from its IFM business? concession and non-concession divisions. Higher variation orders, higher bed occupancy rates and new facilities at the government hospitals under Faber?s concession area have resulted in a 5.9% y-o-y revenue increase in its concession business. Meanwhile, revenue contribution from its IFM contracts in UAE, which were secured last year, has significantly boosted its non-concession revenue by more than 5.5x y-o-y.

Higher q-o-q as projected. After a significant q-o-q contraction in 1QFY10 largely due to one-off revenue from its IFM contract in Abu Dhabi being recognized in 4QFY09, revenue and PBT for 2QFY10 jumped by 46.9% and 86.1% q-o-q owing to a 116% q-o-q surge in revenue at its non-concession IFM division. Meanwhile, following higher progress billings from the Armada Villa project in Taman Desa launched in April 2010, its property division recorded a significant q-o-q increase in revenue from RM2.1m in 1QFY10 to RM20.5m in 2QFY10. Although 1HFY10 revenue and PBT from the property division fell 27.4% and 83% y-o-y respectively, we expect stronger performance in 2HFY10 supported by the upcoming launch of its projects in Laman Rimbunan as well as Taman Desa.

Maintain BUY. We maintain our forecast and BUY recommendation at an unchanged TP of RM3.58 based a SOP valuation. We believe the appointment of UEM Group MD Dato' Mohd Izzaddin bin Idris to Faber?s board will further strengthen UEM?s commitment to keep Faber as part of the UEM Group of companies. This will in turn quash rumors of a potential disposal of UEM?s stake in Faber. Despite the steep share price appreciation YTD, at 10.5x PER on FY10 EPS, Faber still offers an attractive valuation proposition, underscored by its

strong fundamentals and future growth prospects.

HEALTHCARE

Faber is primarily involved in integrated facilities management (IFM) services and property development. It holds a 15-year concession to provide healthcare support services to more than 70 government hospitals.

Stock Statistics

Bloomberg Ticker FAB MK

Share Capital (m) 363.0

Market Cap (RMm) 1,023.7

52 week H?L Price (RM) 3.04 1.00

3mth Avg Vol (?000) 1,271.0

YTD Returns 75.2

Beta (x) 1.72

Major Shareholders (%)

Khazanah Nasional 34.3

Universal Trustee 23.4

By OSK188

Analyst: Norfauzi Nasron

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