INVESTMENT HIGHLIGHTS

• Favelle Favco (Favco) announced its second set of purchase order for the year worth RM78.3m

• Purchase orders are for both tower cranes and offshore cranes

• Current orderbook is RM654.4m as at 15 May 2019

• FY19-20F earnings estimate maintained

• Maintain BUY with an unchanged target price of RM2.89

Second set of purchase order for the year. Favelle Favco (Favco) has announced its second set of purchase order secured from March 2019 up to the date of the announcement; 15th of May 2019. The six orders consists of a mixture of both tower and offshore cranes totalling RM78.3m with expected delivery dates to be mainly in FY19 and FY20.

Impact to earnings. We are making no changes to our earnings estimates at this juncture as the orderbook replenishment is within our FY18 orderbook replenishment assumption of RM305m.

Maintain BUY with unchanged TP of RM2.89. We are still maintaining our BUY recommendation of Favco with an unchanged TP of RM2.89 per share. Our target price is based on EPS19 of 36.1sen pegged to a PER19 of 8.0x.

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 a reasonable dividend yield.

Source: MIDF Research - 16 May 2019