Journey to Wealth
Naim Holdings - Bags another RM205m MRT package
News MRT Co. announced that it had awarded Package S2 of the MRT contract to Naim worth RM205m. The scope of works includes the construction of the elevated stations in Taman Industri Sungai Buloh, PJU 5 and Dataran Sunway. However, there is no announcement from Naim at this juncture.
Comments We expect the construction works to take up to 30 months (2015) to complete, which is in line with MRT Co.'s projected timeline for the date of completion of Package S2. This package is a sub-contract of Package V2 (Kota Damansara-Dataran Sunway), which was previously secured by Gadang Berhad (Not Rated) worth RM863m. We believe that Naim will be able to garner a 6% margin (pre-tax) from the contract in line with the company's track record.
We are neutral on the announcement as the contract award of RM205m will only contribute to Naim's earnings from FY13 onwards. To date, Naim has secured c.RM700m worth of new contracts in 2012, which has exceeded our annual order book replenishment assumption of RM500m. However, a meaningful contribution will only kick in from 2013 onwards as most of the contracts were secured only in the later part of this year.
Outlook To date, Naim's outstanding order book currently stands at RM1.3b (inclusive of the new contract award), which could last it up to the next four years.
Moving forward, Naim is looking forward to kick-start its new mixed property development project at Bintulu Old Airport, which has a GDV of RM2.0b over a period of about 10 to 15 years, by launching a street mall with a GDV of RM400m next year. We think that this is a strategic game play riding on the positive development and activities in Samalaju Industrial Park.
Forecast There are no changes to our FY12 and FY13 earnings estimates. The meaningful contribution from the new contracts will only start to kick-in from 2013 onwards. We have already imputed in RM500m worth of new contracts in our FY13 earnings.
Rating Maintain OUTPERFORM
We are maintaining our OUTPERFORM recommendation due to the attractive upside (+35%) to our TP of RM2.46 as the company rides on the positive development in Samalaju.
Valuation Maintaining our Target Price of RM2.46 based on SOP valuation (see overleaf for details).
Risks Delays in construction projects and escalating building material prices.
Source: Kenanga
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