Journey to Wealth
Naim Holdings - Property push Buy
- Maintain BUY on Naim Holdings, with a higher fair value of RM2.95/share (previously: RM2.88/share) that is pegged to an unchanged 20% discount to its sum-of-parts value.
- Naim's 2QFY12 net profit (+94% QoQ) was ahead of both consensus and our expectations. We had underestimated the recovery of Naim's construction margins after a dismal FY11, while order book visibility has improved.
- As such, we have lifted our FY12F net profit by 47%(FY13F: +20%, FY14F: +3%) to reflect higher new contract assumptions. But this is truncated by a cut in contributions from oil & gas associate Dayang Holdings and higher effective tax rate assumptions.
- 1HFY12 net profit rose 1.2x YoY at RM47mil ' anchored by improving contributions from both its core construction (+5.1x) and property (+75%) EBIT. Contributions from Dayang rose 12% YoY (RM16mil) or 34% of group profits.
- Nevertheless, construction EBIT margin has normalised, to 7.6% in 2QFY12 vs. 16.4% in 1QFY12 (1HFY12: 11.5%) following the near-completion of several projects in the previous quarter.
- We have doubled our new contract forecast to RM700mil for FY12F vs. ~ RM600mil that has already been secured YTD (FY11: <RM100mil). Late last month, Naim won a station contract under the Sg.Buloh-Kajang MRT line (RM208mil).
- We have raised our FY12F pre-sales target from RM213mil to RM265mil (+24% YoY). New property sales for the first seven months of 2012 have reached ~RM182mil, just a tad below RM184mil for the whole of 2011.
- Some of its new launches in the pipeline include a service apartment (GDV: RM130mil) and street mall (GDV: RM180mil) on a 12ha-piece of land that used to house the old Bintulu Airport (estimated GDV: ~RM2bil) ' although the timeline will likely be pushed back from 4Q12 to 1Q13.
- Naim declared an interim dividend/share of 3 sen (2QFY12: 5 sen). For the full year, we have assumed a total DPS of 11 sen or a gross yield of 6%.
- As the largest landbank holder in Sarawak (~2,620 acres) with an estimated GDV of RM9bil, Naim is refocusing on property development to tap into rising residential demand as the SCORE projects start to take shape.
- The stock is trading at a steep 51% discount to its SOP of RM3.60/share on the back of undemanding FY12F-14F PEs of 5x-7x (below trend average of 9x) and P/BV ox 0.6x.
Source: AmeSecurities
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
