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Faber Group (Inter-Pacific Research), reiterates ‘outperform’, with target price of RM2.66

* Outperform: We reiterate “outperform” with a target price of RM2.66 which is at a 10% discount using SOP valuation. We had ascribed 12x and 6x PER to its IFM and property segment respectively. We are optimistic of a recovery in their property segment, which has three projects in the pipeline in the matured residential area of Taman Desa and Kepong. Overseas healthcare and non-healthcare IFM should also see improvement after firming their foothold in UAE and India since FY2009. We are expecting more revenue contribution from both countries through successful bidding of projects.

* 1QFY10 top line rose by 30.6% y-o-y to RM184 million: Step up in revenue y/y was due to the improved contribution from concession and non-concession of IFM segment, up 37.8% y-o-y to RM181.9 million. Drivers from non-concession IFM are: (1) business expansion in UAE; (2) commencement of housekeeping projects in India. Thus, IFM-non concession segment surged 352% y-o-y to RM54.9 million . The IFM-concession segment grew by 6% y-o-y to RM129.9 million due to higher variation order as higher bed occupancy rate and additional new facilities at the government hospitals was recorded in 1QFY2010.

* Revenue dwarfed by 39.5% compared to immediate preceding quarter: revenue from the IFM segment was down 28.6% y-o-y due to the one off gain in revenue received from the hospitals from the claims for the linen loss that was record in 4QFY2009 and also because Faber completed most of the work orders on the IFM infrastructure maintenance from a contract secured in CY2009.

Meanwhile, property segment plunged by 95.7% q-o-q as the Phase 3 Laman Rimbunan, Kepong is nearing completion. Bulk of the revenue from this project has been recognized in preceding 2 years based on the percentage of completion of work progress.

* Slightly below forecast: 1QFY2010 revenue accounted for 19.7% of our full year forecast. The variance is not alarming as we expect revenue contribution from the property segment to pick up in 2Q onwards . To recap, Faber lined up 3 property launches in FY2010 with total GDV of RM459mn to replenish its depleting unbilled sales. The projects include Phase 1A (Fleet) and Phase 1A (DBKL) which is located in Taman Desa KL as well as Laman Rimbunan Phase 4 which is located at Kepong. Phase 1A (DBKL) was launched in 1QFY10; Phase 1A (Fleet) in Q3FY2010; and Laman Rimbunan Phase 4 in Q2FY10. Thus, bulk of revenue should start to kick in from 2QFY2010 onwards, being able to meet their KPI of 12-15% growth in FY2010.


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