INVESTMENT HIGHLIGHTS

• Favelle Favco (Favco) announced its first series of purchase order for the year worth RM61.1m

• Current orderbook is RM576.1m as at 21 February 2019

• 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 November 2018 up to the date of announcement; 20th February 2019. The six orders totalling RM61.1m consists of both its tower and offshore cranes with expected delivery date mainly in 2QFY19 and end-FY19. This brings its current orderbook to RM576.1m (previously RM515m as at 28 November 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. We believe in Favco’s (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 - 21 Feb 2019