News

Faber announced a conditional agreement with consortium ProHAWK Sdn Bhd to provide asset management services for the facilities and infrastructure of a Women and Children’s hospital.

The duration of the contract is up to 27 years with estimated contract value of approximately RM1.03bn.

The project is expected to commence in 2H16 subject to the completion of the construction of the Hospital.

The 12-storey hospital is expected to house 600 beds and function as the national centre of excellence for women and child diseases.

Financial Impact

The RM1.03bn contract translates to RM38m per annum. With assumption of net margin of 10%, we expect the contract to contribute RM4m to the bottomline with fully year contribution to only reflect in FY17.

Pros/ Cons

Positive on RM1.03bn contract award…We are positive on the contract win as this will enhance Faber’s position to become the largest asset and facility management company with diversify portfolio in the healthcare, infrastructure and commercial sectors.

Game changer in sight… Recently, Faber announced a conditional share sales agreement with UEMG for the acquisition of PROPEL and OPUS with a value of RM1.15bn. The deal is expected to be completed by 2H14. The enlarged entity with a potential market capitalisation of >RM2bn and recurring income business model may result in a rerating catalyst for Faber and ultimately lead to stronger interests from institution following.

Strong balance sheet…Faber has net cash of RM240m or RM0.30 per share after completion of the acquisition. Stripping out the cash, the company is only trading at 12.2x FY15 PER now.

Risks

1) Delays in completing the proposed deal; 2) Failure in renewing existing and securing new concession contracts; and 3) Regulatory and political risk.

Forecasts

Unchanged/

Rating

Not rated.

Valuation

By applying a 15x multiple on FY15 EPS, our Target Price works out to RM3.51.

Source: Hong Leong Investment Bank Research - 20 May 2014