We  are  keeping  our  BUY  call,  forecasts  and  FV  of  MYR6.11  on  Naim, following  its  presentation  at  our  SCORE  Powers  Sarawak  To  New Heights  II  conference  last  week  where  positive  guidance  on  its  nearterm outlook was reaffirmed. 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 into Dayang. 

-  No immediate plan for stake in Dayang. Contrary to media speculation, Naim said it has no plans  to either raise or pare down its 33.6% stake in oil & gas (O&G) associate Dayang.

- Strong  take-up  for  Bintulu  Paragon.  Launched  in  February,  the MYR180m  total  gross  development  value  (GDV)  Street  Mall,  the  first component  of  Phase  1  of  the  MYR2bn  Bintulu  Paragon  integrated development, has already registered about 50% take-up.  This is despite premium  pricing  of  around  MYR680  per  sq  ft  (psf)  vis-à-vis  MYR300-MYR400  psf  for  conventional  shop  units  in  Bintulu  (making  Bintulu’s conventional  shop  units  on  par  with  those  in  Kuching).  The  second component  of  Phase  1,  the  recently  launched  MYR30m  GDV  small versatile  office,  has already  recorded  30%-40%  take-up.  Naim plans  to launch the third component of Phase  1,  two condominium blocks (a  37-storey and 39-storey) with a total GDV of MYR170m, by year-end. These Bintulu  Paragon  launches,  coupled  with  bread-and-butter  launches  of residential units and shops in Miri and Kuching, are expected to propel Naim’s  property  sales  to  another  record  year  in  FY13,  on  the  heels  of record  property  sales  of  MYR328m  in  FY12.  Meanwhile,  Naim’s construction  profits  will  be  underpinned  by  outstanding  construction orderbook of MYR862m. 

-  Maintain  Buy.  The  construction  sector’s  fundamentals  are  strongly backed by mega infrastructure, property,  and O&G  projects driven by the Government,  government-linked  companies,  national  oil  company Petronas and the private sector. For Naim, it will also be buoyed by: i) the booming  property  market  in  Bintulu,  ii)  construction  projects  under  the Sarawak  Corridor  of  Renewable  Energy  (SCORE),  and  iii)  the  high earnings growth of 33.6%-owned Dayang.  FV  is  MYR6.11,  based on 12x FY14F  EPS, which is in line with our  one-year  forward target P/E for the construction sector of 10x-16x.

Source: RHB