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



Faber Group Bhd's shares, which surged more than 75 per cent, year-to-date, to RM2.82, is set to rise further given the expected double-digit earnings growth per annum and 20 per cent return on equity for FY10 and FY11, respectively.

Its net profit is expected to grow to RM91.4 million in FY10, compared with RM82.7 million last year, while revenue is anticipated to increase to RM908.3 million from RM805.3 million.

"Based on sum-of-parts method, we derived our target price of RM3.50, providing an upside of 24.1 per cent," MIDF Research said in its note today.

It said the target price was expected to be realised should a new 15-year concession be awarded to the company.

Faber Medi-Serve Sdn Bhd, a subsidiary of Faber, was awarded a 15-year Hospital Support Services concession for public hospitals in the northern region of Peninsular Malaysia and East Malaysia by the Health Ministry in 1996.

The group submitted an application to review the concession agreement and was awaiting government reply in October.

"Any increase in concession rate would boost Faber's revenue,"

MIDF said, adding that the renewal of concession would offer another 15-year earnings visibility to the company.

"We believe the likelihood of Faber signing a new concession agreement is high.

"More importantly, Faber's business prospects remain favourable and promising, moving forward, in line with the growing healthcare sector," it said.

Increasing contribution from abroad and the potential lucrative dividend yield in the mid-to-long term horizon might be another attractive point for Faber.

MIDF said Faber has a dividend policy to pay up to 20 per cent of net earnings and the management has indicated that the number would eventually increase to 40 per cent.

"This means current net dividend yield of about two per cent may double to four per cent," it added.

Faber's share price dipped four sen to close the morning session at RM2.75. It closed at RM2.82 yesterday. -- Bernama