Faber’s 1HFY13  core  earnings  of  MYR22.2m  missed  both  consensus and our expectations due to weaker-than-expected contribution from its property  business.  Correspondingly,  we  slash  our  FY13F  earnings  by 33.1% and trim our FY14F-15F numbers by 2.4-3.4%. Our SOP-based FV is  pared  accordingly  to  MYR2.28  (from  MYR2.34).  Following  the  recent run-up in its share price, we are downgrading our call to NEUTRAL. 
 
- Disappointing numbers. Faber’s 1HFY13 revenue dropped 15.1% y-o-y  to  MYR341.3m  as  contribution  from its property  segment sunk  81.4% y-o-y  to  MYR15.6m  on  lower  sales  registered.  Gross  profit,  meanwhile, plunged  35.8%  y-o-y  to  MYR68.7m  as  the  implementation  of  minimum wages effective 1 Jan eroded margins at its concession business. All in, 1HFY13  core  earnings  came  in  at  a  subpar  MYR22.2m  (excluding impairment of assets amounting to MYR3.4m in 2QFY13), falling short of both our and consensus estimates, comprising only 33.4% and 33.2% of full-year  forecasts  respectively.  2QFY13’s  revenue  of  MYR168.3m  and core  earnings  of  MYR10.6m  weakened  y-o-y  and  q-o-q  on  softer-than-expected property sales.

- Earnings  revision.  Taking  into  account  the  subpar  showing  of  its property arm, we are slashing our FY13F earnings forecast by 33.1% to MYR44.4m  by  lowering  our  target  property  sales  to  MYR25.0m  (from MYR80.0m). While we leave our FY14F and FY15F target property sales of MYR80m p.a. unchanged for now,  we lower our margin assumptions for its facilities management services over the next two years to factor in higher  overhead  expenses  as  witnessed  currently.  As  a  result,  our FY14F  and  FY15F  earnings  estimates  are  trimmed  by  2.4%  and  3.4% respectively.

- Downgrade  to  NEUTRAL.  Following  our  earnings  revision,  our  SOP-based FV is lowered accordingly to MYR2.28 from MYR2.34. This could potentially  be  bumped  up  to  MYR2.39  (on  a  fully  diluted  basis)  upon completion  of  its  potential  acquisitions  of  Projek  Penyelengaraan Lebuhraya (Propel) and Opus Group from UEM Group. Nonetheless, the recent run-up in share price means that upside is now limited even if the proposal materializes. Hence, we are downgrading our call to NEUTRAL.     

Source: RHB