Faber’s  9M13  earnings  were  in  line  with  our  estimates  as  the  fall  in property  earnings  was  expected.  Despite  expectations  of  a  stronger 4Q13 and the proposed acquisitions of Propel and Opus Group, we feel the share price – which has surged 73% YTD – may have priced in most of  the  positives.  Maintain  NEUTRAL  and  MYR2.28  FV,  based  on  a primarily DCF derived SOP valuation.

• Results  in  line.  Faber’s  9M13  core  net  profit  plunged  47%  y-o-y  to MYR29.3m  due  to;  i)  the  absence  of  MYR23m  in  property  earnings  it enjoyed in 2012, and ii) the exclusion of a  MYR10m of one-off gain in its integrated  facilities  management  (IFM)  non-concession  business.  That said,  while  its  9M13  net  profit  made  up  just  66%  of  our  2013  full-year forecast,  Faber’s IFM concession business typically enjoys an earnings spike in 4Q as government hospitals seek to exhaust their budgets.
• Weaker  concession  and  property  earnings.  9M13  IFM  concession pre-tax profit was down 14% y-o-y despite a 4% rise in revenue  during the  period  as  Faber  struggled  with  higher  labour  costs  following  the implementation  of  minimum  wage  in  Jan  2 013.  Meanwhile,  property sales and pre-tax profit  sank 82% and 91% respectively y-o-y as both its Kepong and Taman Desa projects were completed in 2012, while it  only launched its  new Faber Antara project  in June this year.  This somewhat offset  the  13%  y-o-y  pre-tax  profit  growth  posted  by  its  IFM  nonconcession business due to better cost controls despite flat revenue.
• Maintain forecasts. Stronger  4Q seen  but all eyes on acquisitions. We keep our forecasts unchanged as we expect a stronger 4Q13 due to:i)  stronger  orders  from  its  IFM  concession  business,  and  ii)  property sales  speeding  up.  However,  given  the  mid-single  digit  growth  going forward,  we  feel  that  the  risks  are  high  as  Faber’s  share  price performance  will hinge on  the  completion of its proposed  acquisitions of Propel and Opus Group from UEM Group.
• Maintain NEUTRAL.  With its share price having surged  73% YTD,  the stock’s catalyst are limited  even if the proposed acquisitions materialize. Thus we maintain our NEUTRAL call and SOP-derived MYR2.28 FV.

Financial Exhibits

SWOT Analysis

Company Profile
Faber is involved in the provision of hospital support services as well as integrated facilities management under a concessio n model. It has also established a niche in the property development segment, with some of its key projects in Taman Desa and Taman Danau Desa in Kuala Lumpur

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Source: RHB