INVESTMENT HIGHLIGHTS

• Orderbook of RM252.6m.

• Decent PBT margins above 20%

• Plans to expand service offerings

• Not rated with FV of RM0.42 based on FY17F PER of 11x.

Business Overview:

GFM Services Bhd (GFM) provides integrated facility management services and consultancy services to clients from public and private sectors. It has completed RM1.2b worth of projects over the course of 16 years since establishment. It will resume AsiaEP Resources Bhd’s listing status through a reverse takeover.

Investment theses: 1. Orderbook of RM252.6m. This should keep earnings visibility for 3 years. Beyond 2020, it has an RM124.4m contract from the Universiti Teknologi Mara Malaysia, Tapah campus that lasts for 15 years. The company is particularly strong in the education sector and targets more jobs to maintain workers’ camp at Rapid, Pengerang.

2. Decent PBT margins above 20% in the previous years. We expect PBT margins to stay over 20% due to the management’s experience in executing the jobs as well as its choice of jobs. The company is also asset light, with minimal fixed costs, which allows it to manage its costs efficiently.

3. Plans to expand service offerings. The group targets to expand its services offering as well as to participate actively in government initiatives. It will also continue to utilise information technology to further boost its cost management, efficiency and customer relationship.

Valuation:

We ascribe a fair value of RM0.42 on GFM based on 11x PER of FY17 EPS. We think the 11x PER is fair compared to its peer AWC Bhd (market cap RM249.7m), which is also trading at 11x. Meanwhile, another big facility management services provider, UEM Edgenta Bhd (market cap RM2.67b), is trading at 16.5 times PER.

Source: MIDF Research - 9 Jan 2017