Naim Holdings - additional jobs at Bengoh Dam

• Naim Holdings Bhd announced on Bursa Malaysia yesterday evening that the group has received an award from the Kuching Works Department for an infrastructure contract at Bengoh Dam in Kuching, Sarawak.

• The contract is worth about RM168mil, involving the designing and building of a resettlement scheme following the near completion of the dam.

• Naim is currently the main contractor for the Bengoh Dam, which measures about 63 metres high and 237 metres long. The dam has an estimated capacity of 144 million cubic metres. Works started in August 2007 and is scheduled to be completed by the end of this year.

• More importantly, the latest announcement indicates Naim’s increasing job visibility amid a re-acceleration of newsflow in Sarawak. This comes on the heels of the RM2.4bil Sabah Oil & Gas Terminal (SOGT) project that the group secured in a 30:70 partnership with South Korea’s Samsung early last month. We make no changes to our earnings assumptions – as this new win forms part of our RM1bil new orderbook assumption for FY10F.

• We continue to like Naim as an excellent proxy to Sarawak’s SCORE – where contract flows are intensifying ahead of the impending state elections (due by July 2011).

• We draw comfort from five new hydro dams (capacity: 5,000MW) worth RM20bil that would form part of the 131 Entry Point Projects (EPPs) under the Malaysian government’s Economic Transformation Programme announced last Monday.

• Given its entrenched position as one of Sarawak’s leading contractors, we believe Naim should be in a strong position to bid for supporting infrastructure works – including access roads leading to the proposed dams. This is on top of additional work packages that the group is trying to crystallise under the Kuching Flood Mitigation Scheme (balance: ~RM1.1bil).

• Maintain BUY on Naim with an unchanged fair value of RM5.09/share – based on a 20% discount to its net asset value (NAV). The stock trades at an alluring FY10F-12F PEs of only 6x-9x against a robust EPS CAGR of 20% and FY10F net gearing ratio of only 5%.

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