UEM  Group  has  proposed  to  dispose  of  100%  equity  interest  each  in Projek  Penyelenggaraan  Lebuhraya  Bhd  (PROPEL)  and  Opus  Group Bhd (OPUS) to Faber for a total of MYR1.15bn. Based on valuations we deem fair, we  advise  shareholders  to  vote  for  the  proposals as we  see long  term  earnings  accretion.  We expect Faber’s FY14  EPS  to  surge 46.5% on completion of the proposal. Maintain BUY and MYR2.34 FV. 
 
  UEM proposes asset disposals. UEM Group has proposed to dispose of  its  100%  equity  interest  in  both  PROPEL  and  OPUS  to  Faber  for  a total consideration of MYR1.15bn. This will be satisfied by  the issuance of 450.5m new Faber shares at an issue price of MYR2.00 per share, as well as a cash consideration of MYR250.0m.  

  Details  and  pricing.  OPUS  is  one  of  the  world’s  leading  project consultants with operations in New Zealand, Australia, UK, Canada and Malaysia.  Based  on  the  proposed  transaction  price  of  MYR651.0m  and the company’s FY12  net  profit  of  MYR57.5m,  this  translates  into  an acquisition  P/E  of  11.3x,  or  1.1x  P/BV,  which  we  deem  fair.  PROPEL, meanwhile,  is  the  largest  highway  maintenance  service  provider  in Malaysia. Based on the proposed price tag of MYR500.0m and its FY12 net profit of MYR53.8m, the acquisition implied P/E of 9.3x, or 3.4x P/BV, which we deem justified.

  Faber to triple earnings base. Should the proposals materialize, Faber would  emerge  as  Malaysia’s  largest  asset  and facility management player.  Our  calculations  show  that  its  FY14  EPS  would  improve  by 46.5% despite the enlarged share base post issuance of new shares as we  factor  in  a  potential  combined  net  profit  contribution  of  MYR110.0m from PROPEL and OPUS. This would more than triple Faber’s previous FY14 earnings of MYR48.2m.

  Maintain  BUY.  We  are  positive  on  the  proposals  as  we  believe  this would shore up Faber’s earnings,  which  we  had  previously  forecast would  go  on  a  downtrend  due  to  the  expected  loss  of  income  from  its Sabah  and  Sarawak  operations,  and  open  up  new  opportunities  on  the global front, leveraging on OPUS’ regional presence. Maintain BUY, with our SOP-based FV unchanged at MYR2.34 for now.

Source: RHB