1H15 core earnings of MYR39.8m came in at 46% of our forecast. We continue to like Favelle Favco for its clean balance sheet, attractive dividend yields and strong orderbook. Maintain BUY with a revised TP of MYR2.84 (from MYR3.68, 14% upside) based on 7x FY16F P/E, as we roll forward our valuation to FY16.

Core earnings of MYR39.8m. 1H15 revenue came in at MYR399.4m, down 1.4% YoY. EBIT grew 12% YoY due to improved operational efficiency. Reported net profit came in at MYR38.9m (+1.4% YoY). Stripping out forex losses, 1H15 core earnings came in at MYR39.8m (-1.1% YoY).

New orders worth MYR52.8m. Favelle Favco recently announced new crane orders worth a total of MYR52.8m. The orders are for the supply of two tower cranes from Transport Equipment Sales ( a US-based company) and Stride High Pty Ltd (an Australia-based company), and two offshore cranes from Avantgarde Petroleum (a Middle East-based company) and Keppel Corp (KEP SP, BUY, TP: SGD10.00). Note that Transport Equipment Sales and Keppel are repeat customers of Favelle Favco. With the new orders, Favelle Favco’s orderbook currently stands at MYR866m, which we estimate 90% is from the oil and gas industry, with the rest from construction and other industries. We are pleasantly surprised by the new crane orders from oil and gas-related companies, as we had expected crane orders to slow down, given the current downturn in offshore oil and gas activities.

Maintain BUY with a revised TP of MYR2.84. With results coming in within our expectations, we make some minor adjustments in our model. We roll forward our valuation to FY16 and arrive at a new TP of MYR2.84 (14% upside), based on 7x FY16F P/E (from 9x). We peg a lower P/E to take into account the company’s lack of strong earnings growth. All in, we continue to like Favelle Favco for its clean balance sheet and decent dividend yields, supported by a MYR866m orderbook. At a 40% payout ratio, the stock is currently trading at attractive 6.5-7.2% dividend yields. At our TP of MYR2.84, it is trading at 5.7-6.2% dividend yields.