KEY INVESTMENT HIGHLIGHTS

• Favelle Favco (Favco) announced its first set of purchase order for the year worth RM56.1m
• Purchase orders are for both tower cranes and offshore cranes Current orderbook at RM569.1m as of 23rd Septmeber 2020 including RM76m from Intelligent Automation announced back in August
• FY20-21F earnings maintained
• Maintain BUY with an unchanged TP of RM3.00 per share

First set of purchase order for the year. Favelle Favco (Favco) has announced its first set of purchase orders secured via its subsidiaries from 27th August 2020 up to the date of the announcement; 23rd of September 2020. The three (3) orders consists of a mixture of both tower and offshore cranes totaling RM56.1m with expected delivery dates to be mainly in FY20 and FY21.

Earnings impact. We are making no changes to our FY20-21F earnings estimates at this juncture as the purchase orders came in within our FY20-21F orderbook replenishment assumptions of RM350m for FY20 and RM370m for FY21.

Target Price unchanged at RM3.00. We are maintaining our target price on FFB at RM3.00. Our TP is derived from pegging an unchanged PER20 of 8.0x to EPS20 of 37.5sen

Maintain BUY While we are expecting lower revenue to be recognised by FFB this year following the challenging operating environment brought upon by the oil price war earlier this year and the ongoing fight against Covid19; we believe that FFB will be able to sustain its earnings for this year. This is given that its operating and profit margins have remained intact for the past two quarters despite the restrictions brought upon by Covid19 and enforcement of MCO.

Furthermore, as evident in the purchase orders and in-line with the gradual re-opening of economies worldwide; we are seeing the demands coming back for both offshore and infrastructure cranes as demand for crude and infrastructures returns to the market. Hence, we are maintaining our BUY recommendation on Favco for now as we continue to believe in Favco’s (i) stable orderbook mix with infrastructure-based projects; (ii) net cash position and; (iii) consistent dividend payout translating into an attractive FY21F dividend yield of 6.7%.

Source: MIDF Research - 24 Sept 2020