We raise FY13-14 forecasts by 26-35%, having reflected a 23-31% upgrade in forecasts of 33.6%-owned Dayang.  Buy call is maintained while fair value is raised by 35% to MYR6.11 (from MYR4.51).  We like Naim as it is the best proxy to the booming property market in Bintulu backed by massive industrial development in Samalaju.  It also provides a cheaper entry to Dayang.   

- Dayang effect.  We raise FY13-14 forecasts by 26-35%, having reflected a 23-31% upgrade in forecasts of 33.6%-owned Dayang (see our Company Update on Dayang dated 27 May 2013).

- Strong years ahead.  During an analysts’ briefing in Mar 2013, Naim guided another record year in terms of property sales in FY13, underpinned by new launches worth MYR900m of which half will come from shops, offices and condominium units at its RM2bn integrated development  Bintulu Paragon in Bintulu, with the balance from landed/high-rise residential units and shops in Kuching and Miri.  Naim also guided new construction contract wins of about MYR500m in FY13 that are most likely to come from  “infrastructure works in Sarawak, particularly, road jobs”.  At present, its outstanding construction orderbook stands at MYR1bn.

- Maintain Buy.  Post the 13th general election, we believe investors should refocus on sector fundamentals that are reasonably attractive underpinned by a construction upcycle.  For Naim, it will also be buoyed by: (1) The booming property market in Bintulu; (2) Construction projects under Sarawak Corridor of Renewable Energy (SCORE); (3) Sustained high construction margins given limited competition from only a small pool of Sarawak-state-registered (UPK) contractors for most public jobs in Sarawak; and (4) High earnings growth of 33.6%-owned Dayang.  Fair value is raised by 35% to MYR6.11 (from MYR4.51) based on 12x revised FY14 EPS, in line with our 1-year forward target PER for the construction sector of 10-16x.

Source: RHB