Favelle Favco has secured orders for a total of nine cranes. This lifts its YTD new orders to MYR186m.  We believe  it  has contracts to deliver a total  of  MYR756.2m  worth  of  cranes  between  FY14-FY16,  with  the majority  to  be  delivered  in  FY14.  We  keep  our  FY14/FY15  forecasts unchanged  as  the  new  orders  are  within  our  estimates.  Maintain NEUTRAL with an unchanged FV of MYR3.70 based on target FY14 P/E of 11x.

• MYR98m worth of new crane orders. Favelle Favco announced that its wholly-owned subsidiaries, Favelle Favco Cranes Pte Ltd, Favelle Favco Cranes Pty Ltd and Favelle Favco Cranes (M) SB has secured nine new offshore  crane  orders.  The  orders  are  from  Keppel  Fels  Ltd,  Marr Contracting  Pty  Ltd,  Thai  Nippon  Steel  &  Sumikin  Engineering  & Construction Corp Ltd, China Merchants Heavy Industry (Shenzhen) Co Ltd,  China  Merchants  Heavy  Industry  (Jiangsu)  Co  Ltd,  and  PT Megatama  Internal  for  a  combined  total  of  MYR98m.  Eight  out  of  the nine new cranes are meant for offshore use. Two  cranes  –  including a tower  crane  meant  for  onshore  construction  use  -    are  scheduled  for delivery within 2Q-4QFY14 and six others by FY15.
• To deliver MYR756.2m worth of cranes. We believe Favelle Favco has contracts  to  deliver  a  total  of  MYR756.2m  worth  of  cranes  between FY14-FY16.  61.8%  (or  MYR467.6m)  of  the  order  is  expected  to  be delivered in FY14, 32.3% (or MYR244.5m) in FY15 and the rest in FY16. We note that its YTD total orderbook has hit MYR186m.
• Maintain  NEUTRAL  with  FV  MYR3.70.  We  keep  our  FY14/FY15 earnings  forecasts  unchanged  as  the  new  crane  orders  are  still  within our estimates.  We maintain our NEUTRAL call on the stock due to the limited  upside  to  our  unchanged  FV  of  MYR3.70.   Our  FV  is  based  on target FY14 P/E of 11x, on par with those of its oil & gas (O&G) small- to mid-cap peers within our coverage.  We believe it has now reflected its earnings growth that was  driven  by  the buoyant demand for the drilling rigs.

Source: RHB