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Results above expectation

Fajarbaru Builder Group Bhd

Highlights:
  • *Outperform: With construction sector expected to improve from positive news to be announced in 10MP in June 2010, it should somewhat negate the negative sentiments like issues of implementation, eroding margins and lack of dominant players currently lingering. Fajarba ru, being a well managed company with a healthy balance sheet will remain as one of the front runners. Outperform with the target price at RM1.31 based on 13senFY10 EPS and PER of 10x.

  • *Better-than-expected performance: 9MFY10 net profit of RM17.0mn or up 41.6% y/y made up 77.4% of FY10’s earnings of RM21.9mn. The better-than-expected performance could be attributed to higher margins from their current key on-going construction projects as a result of better cost control i.e. Seremban-Gemas double tracking project and Tampin hospital.

  • *New contract awards more likely to be reflected in FY11: In FY10, they managed to secure only one contract worth about RM70mn i.e. infrastructure and civil works for Phase 1 of an equa-culture/shrimp farming project in Setiu, Terengganu, bringing their order book to around RM420-430mn. They have bid for new contracts which are more likely to be reflected in FY11. Amongst the key projects are: (1) teaching hospital in Kuantan (RM400mn) based on private finance initiative (PFI); (2) work in new LCCT thatincludes the parking apron (RM200mn); taxiway (RM100mn); and runway (RM400-RM500mn); (3) LRT extension; and (4) bridge/road projects.


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