INVESTMENT HIGHLIGHTS

• Favelle Favco (Favco) announced its first series of purchase order for the year worth RM80.4m

• Current orderbook is RM507.4m as at 29 October 2018

• FY18-19 earnings forecasts maintained

• Maintain BUY with an unchanged target price of RM2.93

A slew of purchase orders secured for the year. Favelle Favco (Favco) has announced a slew of orders secured from June 2018 until 29 October 2018. The four orders totalling RM80.4m consists of both its tower and offshore cranes with expected delivery date mainly in 3QFY18 and FY19. This brings its current orderbook to RM507.4m (previously RM427.m as at 23 August 2018).

Impact to earnings. We are making no changes to our earnings estimates at this juncture as the orderbook replenishment is within our expectations.

Maintain BUY with an unchanged TP of RM2.93. We are still maintaining our BUY recommendation of Favco with an unchanged TP of RM2.93 per share. Our target price is based on EPS19 of 38.6sen pegged to a PER19 of 7.6x (0.5 standard deviation discount to 5-year historical average). The average PER of its Asian regional peer’s is 11x. Key positive catalysts for Favco include (i) change in orderbook mix by increasing infrastructure-based projects; (ii) net cash position and; (iii) consistent dividend payout translating into an attractive dividend yield.

Source: MIDF Research - 30 Oct 2018