Journey to Wealth
Naim Holdings - Bags RM208m KVMRT package
News Naim announced that they had finally received the letter of award (LOA) for Package S4 from MRT Co. for the construction of the elevated stations in Section 16, Pusat Damansara and Semantan for a total contract sum of RM208m.
Comments We are neutral on the announcement as the contract award of RM208m is within our FY12 annual order book replenishment of RM500m.
Based on management's guidance, the construction of the three elevated stations will take up to 48 months and it will be completed by 2016.
We expect the contract margin to hover around 6% to 8% at the pre-tax level, which is in line with the company's track record.
Outlook To date, Naim's outstanding order book currently stands at RM1.3b inclusive of the contract award, which would provide earnings visibility for the next four years.
The next rerating catalyst for Naim will be additional new contracts secured within the remaining months of FY12. Thus far, Naim has managed to secure RM500m worth of new contracts in FY12.
Forecast No changes to our FY12E and FY13E earnings estimate.
This is because with the longer period of construction, we expect the contribution of this contract could be minimal at 2% to FY12 earnings as bulk of the earnings is expected to be recognised in the next few years.
Rating Maintain OUTPERFORM
We maintain our OUTPERFORM recommendation due to the attractive upside (+66%) to our TP of RM2.94.
Valuation Maintain our Target Price of RM2.94 based on SOP valuation.
Risks Delays in construction projects.
Escalating building material prices.
Source: Kenanga
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