HLBank Research Highlights

Trading Idea - NAIM: Poised to test RM1.00-1.13 zones

HLInvest
Publish date: Mon, 13 Jul 2015, 11:40 AM
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This blog publishes research reports from Hong Leong Investment Bank
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NAIM (RM2.19/Vol:481k)
 

  • NAIM (listed in Sep 2003) is a fully-integrated property and construction player in Sarawak focusing on integrated property developments, construction, civil engineering, oil and oil and gas services (via a 29% stake in Dayang). Naim is one of the leading township developers in Sarawak, with flagship developments in Miri, Kuching and Bintulu.
  • The group is also a Class A Bumiputera Contractor with ISO 9001 certification and has recently emerged as one of Malays ia’s larges t Bumiputera contractors which has carried out more than RM5bn worth of works (including its own development projects). In terms of FY14 PBT, the property, construction and others divisions contributed about 50% whilst the rest was contributed by Dayang.
  • Spread its wings beyond Sarawak. Naim has spread its wings to: 1) Sabah via a JV with Samsung Korea for an oil and gas terminal project; 2) Klang Valley Mass Rapid Transit (MRT) project and 3) Fiji, for road upgrading and rehabilitation projects. Given its track record, Naim could also be one of the beneficiaries of KVMRT Line 2 RM28bn projects, with construction works likely to be awarded in 2016.
  • Dayang’s outlook remain positive. Despite recent correction in oil prices, Dayang’s s hort to mid-term outlook remain positive, given its business of core brownfield services provider will be relatively resilient amidst low oil price environment. Current orderbook of RM4bn will last at least until 2018. Meanwhile, Dayang’s acquisition in Perdana is also a strategic fit for both companies as Perdana’s fleet of vessels will be complementary to Dayang’s HUCC business and this will help Dayang to well position for next round of HUC tender in 2018/2019.
  • Naim is a good proxy to Sarawak’s buoyant economy, backed by massive infrastructure spending (such as the RM27bn Pan-Borneo Highway) and investments in the oil and gas and heavy industrial sectors under the Sarawak Corridor of Renewable Energy (SCORE) blueprint. Naim’s RM1.3bn order backlog will underpin its construction profits over the next two years.
  • Naim is a proxy to Sarawak-election play. Thematically, with speculation rife of a Sarawak snap election to be held by year-end (due by mid-June 2016), Sarawak stocks will attract attention from an expected acceleration in newsflow momentum.
  • Valuations are undemanding at forward 7.6x FY15 P/E and trading at 57% discount to its Mar 2015 BVPS of RM5.09. Based on Dayang’s s hare price of RM2.16, Naim's 29% associate stake of RM549m already accounted for 100% of Naim’s marketcap of RM548m, implying that the market is valuing its core property and construction businesses for free!
  • Bonus issues to reward shareholders given its huge reserves? Naim has not pursued any corporate exercises since listed in 2003, despite more than three folds surge in s hareholders’ funds from a mere RM381m in 2003 to RM1.272bn in March 2015. To recap, another Sarawak’s conglomerate, CMSB has undertaken a 1:2 bonus and 1:2 shares split exercises in June 2014.
  • Ripe for further relief rally following Tweezers bottom and hammer patterns on the daily and weekly charts. Naim’s share price nose-dived 51% from 52-week high of RM4.25 (14 July 14) to a low of RM2.08 (9 & 10 July) before closing at RM2.19. Given the formation of Tweezers bottom and hammer candlesticks patterns on daily and weekly charts, Naim’s share prices are likely to stage a technical rebound soon. A decisive breakout above RM2.30 (daily mid Bollinger band) will drive prices higher to RM2.48 (daily upper Bollinger band) and our LT objective of RM2.69 (100-d SMA). Supports are RM2.08 and RM2.00 psychological levels. Cut loss below RM1.98.

Source: Hong Leong Investment Bank Research - 13 Jul 2015

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