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PP 7767/09/2011(028730)

Malaysia

PP 7767/09/2011(028730) Mala y sia RHB Research 22 October 2010 Corporate Highlights Institute Sdn Bhd A
 

RHB Research

22 October 2010

 

Corporate Highlights

 

Institute Sdn Bhd

A member of the RHB Banking Group

 

Company No: 233327 -M

 

News Update

 

MARKET DATELINE

 

22 October 2010

Fajarbaru Builder Group

Share Price

:

RM1.04

Fair Value

:

RM1.37

Lands RM36.5m Pasir Mas Halal Park Infrastructure

Recom

:

Outperform

Job

 

(Maintained)

 

Table 1 : Investment Statistics (FAJAR; Code: 7047)

 

Bloomberg: FBC MK

 

Net

FD

Net

FYE

Turnov

Profit#

EPS#

Growth

PER

EPS#

C.EPS*

P/CF

P/NTA

ROE

Gearing

GDY

Jun

(RMm)

(RMm)

(sen)

(%)

(x)

(sen)

(sen)

(x)

(x)

(%)

(%)

(%)

2010

165.9

24.7

16.2

34.3

6.4

-

-

4.3

1.2

18.4

Cash

5.8

2011f

233.0

25.1

14.4

(10.8)

7.2

13.0

-

14.0

1.2

16.6

Cash

5.8

2012f

284.0

28.0

15.2

5.5

6.8

14.5

-

12.2

1.1

16.3

Cash

5.8

2013f

315.0

30.2

16.4

7.6

6.3

15.5

-

10.9

1.0

15.6

Cash

5.8

PP 7767/09/2011(028730) Mala y sia RHB Research 22 October 2010 Corporate Highlights Institute Sdn Bhd A

Main Market Listing /Non-Trustee Stock /Syariah-Approved Stock By The SC

#Excluding EI

* Consensus Based On IBES

Second key contract in FY06/11. Fajarbaru has been awarded by the East Coast Economic Region (ECER) Development Council a RM36.5m contract for earth and infrastructure works for Phase 1, Pasir Mas Halal Park in Kelantan. This is the second key contract Fajarbaru has secured so far in FY06/11, boosting its YTD new contracts secured to RM99m and outstanding construction orderbook by 8% from RM459m to RM496m (see Table 2). To recap, just last month, Fajarbaru was awarded by also the ECER Development Council a RM62.4m contract for earth and infrastructure works for Phase 2, Automotive Industrial Park in Pekan- Peramu, Pahang. Assuming an EBIT margin of 10-12%, the latest contract will fetch RM3.7-4.4m EBIT over the 15-month construction period commencing Nov 2010.

Forecasts.

Maintained

as

we

have assumed

Fajarbaru to secure

RM250m worth of new jobs per annum in FY06/11-12.

Risks. The

risks

include:

(1)

New

contracts secured in FY06/11-12

coming in below our target of RM250m per annum; and (2) Rising input costs.

Construction stocks to do well. We are upbeat on construction stocks as we believe they will continue to generally outperform the market from 4Q2010, buoyed by news flow from: (1) The infrastructure development for the Greater KL National Key Economic Area (NKEA) under the Economic Transformation Programme (ETP), particularly, the RM40bn MRT project; (2) The RM7bn Ampang and Kelana Jaya LRT line extension project; and (3) Federal land deals.

Maintain Outperform.

Fajarbaru,

via Fajarbaru Builder

Sdn Bhd

Signatium Construction Sdn Bhd JV, has been pre-qualified to bid for the LRT line extension project as main contractor as well as segmental box girder sub-contractor. Also, additional kickers will come from its still undemanding valuations, coupled with a strong balance sheet with a net cash of RM124.5m as at 30 Jun 2010, translating to a whopping 75sen/share. Indicative fair value is RM1.37 based on 10x fully-diluted CY11 EPS of 13.7sen, in line with our benchmark 1-year forward target PER for the construction sector of 10-16x.

Issued Capital (m shares)

 

170.0

Market Cap (RMm)

176.8

Daily Trading Vol (m shs)

0.6

52wk Price Range (RM)

0.89-1.14

Major Shareholders:

 

(%)

Big Victory Holdings

13.1

Tan Sri Chai Kin Kong

7.4

Dato’ Ir Low Keng Kok

7.2

 

FYE Jun

FY11

FY12

FY13

EPS Revision (%)

-

-

-

Var to Cons (%)

na

na

na

 

PE Band Chart

PER = 9x PER = 7x PER = 5x
PER = 9x
PER = 7x
PER = 5x
Relative Performance To FBM KLCI FBM KLCI Fajarbaru
Relative Performance To FBM KLCI
FBM KLCI
Fajarbaru

Joshua CY Ng (603) 92802151 joshuang@rhb.com.my

Please read important disclosures at the end of this report.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively available for download from www.rhbinvest.com

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22 October 2010 Table 2 : Outstanding Orderbook Project Outstanding Value (RMm) Seremban-Gemas double-tracking 200 Tampin

22 October 2010

Table 2 : Outstanding Orderbook

Project

Outstanding Value

(RMm)

Seremban-Gemas double-tracking

200

Tampin Hospital

128

Aqua-culture project in Terengganu

69

Earth & infrastructure works for Automotive Industrial Park, Pahang

62

Earth & infrastructure works for Pasir Mas Halal Park, Kelantan

37

Total

496

Source: Company

Table 3: Earnings Forecasts

Table 4: Forecast Assumptions

FYE Jun (RMm)

FY10a

FY11F

FY12F

FY13F

FYE Jun

FY11F

FY12F

FY13F

Turnover

165.9

233.0

284.0

315.0

Construction EBIT margin (%)

13.5

12.4

11.0

Turnover growth (%)

-10.1

40.4

21.9

10.9

New orderbook secured (RMm)

250

250

400

EBITDA

29.8

32.4

36.0

38.6

EBITDA margin (%)

17.9

13.9

12.7

12.3

Depreciation

-0.8

-0.8

-0.8

-0.8

Net Interest

2.1

2.0

2.2

2.4

Associates

0.0

0.0

0.0

0.0

EI

0.0

0.0

0.0

0.0

Pretax Profit

33.0

33.5

37.4

40.2

Tax

-8.4

-8.4

-9.3

-10.1

PAT

24.6

25.1

28.0

30.2

Minorities

0.1

0.0

0.0

0.0

Net Profit

24.7

25.1

28.0

30.2

Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors, officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively available for download from www.rhbinvest.com

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22 October 2010 Neutral = Industry expected to perform in line with the FBM KLCI benchmark,

22 October 2010

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the actions of third parties in this respect.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively available for download from www.rhbinvest.com

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