Journey to Wealth
Fajarbaru Builder - Disappointing loss in FY12
Period 4Q12/FY12
Actual vs. Expectations
The reported FY12 revenue of RM141m came broadly in line with expectations, accounting for 92% of our full year estimate.
However, the net loss of RM21.2m for FY12 was disappointing as against ours and the street's net profit estimates of RM5m and RM4m respectively.
Dividends No dividend was declared.
Key Results Highlights
YoY, Fajarbaru recorded net loss of RM20m in 4Q12 on the back of its revenue of RM8.3m. The higher than expected loss was mainly due to total provision made for its ongoing projects. The management is currently seeking to claim Variation Orders (V.O) for some the projects that are currently behind schedule e.g. the LRT extension project.
QoQ, its net loss widened from RM4m to RM20m as there was no progress on its LRT extension project while it has already incurred mobilisation and other preliminary cost on site.
Outlook Based on our channel checks, the D.O. for LRT works has been approved by the state government in April-12. Moving forward, we would expect the contribution from the LRT works to kick in for FY13.
Its outstanding order book of c.RM900m is equivalent to 6.4x of its FY12 revenue, which will provide earnings visibility for another 3 years.
Change to Forecasts
We are maintaining our FY13 estimates at this juncture pending more clarifications and guidance from management.
Rating Maintain OUTPERFORM
We believe that the FY12 loss is just a temporary setback for Fajarbaru as we understand that the progress for its LRT extension work will improve from 2H12 onwards.
Valuation We have revised our TP lower to RM1.13 as we ascribed a lower PER of 8x (from 9x) on its FY13 earnings due to the weaker sentiment on the stock from delays in the LRT extension project.
Risks Delay in LRT works by the main contractors.
Escalating building material prices.
Source: Kenanga
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