Faber rebounds on fresh optimism

KUALA LUMPUR: Shares of Faber Group Bhd advanced 6% on Wednesday, Mar 16 on the back of the company's bullishness in the renewal of its 15-year concession for government hospital support services (HSS).

The stock also attracted attention as Faber, which is spearheading the Energy Performance Management System (EPMS) pilot project, anticipated revenue contribution from five hospitals beginning 3Q11. The group has commenced energy audits on five hospitals in the pilot project that seeks to ensure efficient use of energy in government buildings.

Faber managing director Adnan Mohammad had, during a briefing for analysts and media on Tuesday, said the group was well positioned for the concession renewal of another 15 years based on its experience, track record and financial ability.

The group is optimistic it was a matter of time that it would be in detailed discussion with the relevant authorities on its application to renew its 15-year contract which expires this October.

Currently, Faber's contract entails the provision of support services to more than 70 government hospitals in Malaysia. The group is a key player in the integrated facilities management (IFM) and property development sectors.

Faber on Wednesday rose 11 sen or 6% to close at RM1.95 with 2.03 million units traded after touching an intra-day high of RM1.97. At RM1.95, the stock was trading 57% above its 4Q10 net assets per share of RM1.24.

The stock had contracted 23% year-to-date. Faber traded to a 52-week high of RM3.29 on Sept 22, 2010 and a low of RM1.57 on March 2, 2011. According to Bloomberg data on Wednesday, the counter had a market capitalisation of RM707.85 million and trading at an estimated consensus price-to-earnings (PE) ratio of 7.14 times.

OSK Research said it maintained the view that the HSS contract would be renewed and announced in a matter of time based on Faber's management response to questions related to its existing HSS concession during Tuesday's briefing.

"We believe it is unlikely that the concession would not be renewed given that Faber has poured in substantial investments since the concession took effect, and the fact that the company has the expertise and logged in a track record in providing health support services," it said in a research note on Wednesday.

OSK Research said it was maintaining a "trading buy" recommendation on Faber at an unchanged target price of RM3.02 based on sum-of-the-parts (SOP) valuation, noting that its current valuation was based on the assumption that the concession would be renewed based on the existing terms and rates.

On the EPMS pilot project, the research house said the move was is in line with Faber's strategy to diversify its revenue within the scope of its IIFM segment. It believed Faber had the capability to undertake such a venture as it was related to and complemented its existing business.

"With the project still at a preliminary stage, management has declined to give more details with regard to its financial impact. However, as we mentioned in our previous report, assuming a 50:50 savings sharing arrangement, this project will generate some RM35 million to RM70 million per annum to Faber's topline," it pointed out.

HwangDBS Vickers Research said in a commentary note on Wednesday that Faber's energy audit on five hospitals to be completed in April, if successful, could involve up to 120 buildings identified by the government under the EPMS project.

"Implementation of the project is subject to finalisation of the company's business model with the government. However, initial capital expenditure and revenue stream are undisclosed pending further discussion with Pemandu," it said, adding that the project's internal rate of return (IRR) could be in the region of 10% to 12%.

On property development, Faber's management disclosed that via its unit Faber Development Holdings Sdn Bhd, the gross development value (GDV) of its current projects amounted to RM509.7 million while projects in the pipeline was expected to generate RM508.5 million in GDV.

The company said phase 1A of its Armada Villa project consisting of 40 semi-detached units and five bungalow units, had registered a take-up rate of 77.8% and expected to be completed by 2Q12. The project situated in Taman Danau Desa was launched in April last year with a GDV of RM141 million.

Faber's phase 4 & 5 Laman Rimbunan project in Kepong had reported a take up rate of 77.4% for its package 1 and 2 which consisted of 48 and 54 semi-detached units respectively. The company said package 1 and 2 was launched last November while package 3 which comprises 54 semi-detached units was expected to be launched in 3Q11.

According to Faber, phase 4 and 5 of Laman Rimbunan in total has a GDV of RM278 million with selling prices raging from RM1.5 million to RM2.6 million per unit.

On its high-end condominium project in Persiaran Gurney, Kuala Lumpur, Faber said the project with a GDV of RM225 million was expected to be launched by 4Q11. Located on 0.91ha of land in the city centre, it is expected to be completed within three years after the launch.

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