FABER (FV RM2.34 - TRADING BUY) 1QFY12 Results Review: Still Playing The Waiting Game

Faber’s 1QFY12 net profit made up 21.3% and 25.6% of our and consensus’ FY12 net profit forecasts, which we view as in line with our estimates on incorporating 1Q’s seasonal weakness as well as  the  anticipated  stronger  showing  for  the remaining quarters. We maintain our forecast and Trading Buy recommendation on Faber, at  an  unchanged FV of RM2.34, based on  a  10% discount to our SOP valuation. Despite the prolonged delay in  renewing its hospital support services (HSS) concession, we  hold on to our  view that  a renewal is forthcoming given Faber’s vast experience and good track record.

Within expectations. Faber’s net profit of RM16.5m for 1QFY12 accounted for about 21.3% and 25.6% of our and consensus FY12 forecasts respectively. Nevertheless, since 1Q is typically the weakest quarter due to seasonal factors and the fewer number of working days, we deem the results in line with our estimates. We also expect better performance for the rest of the year, attributed to heightening activities in relation to its HSS concession and higher progress billings for its property division. Meanwhile, revenue was down by 7.2% y-o-y in the absence of contribution from its IFM contracts in Abu Dhabi, which ended in the middle of last year. Despite the lower revenue, net profit was still 16.5% higher y-o-y. This is due to improved margins, boosted by contributions from the property division which generally commands higher margins compared to its IFM business. EBIT margin also increased, to 16.9% in 1QFY12 from 13.7% in 1QFY11.

Concession renewal still pending. When Faber’s 15-year HSS concession expired on 28 Oct 2011, the Government had extended the concession period for 6 months up to 28 April 2012. However, on 27 April 2012, Faber was informed by the Government that the company will continue to execute the existing concession until a new one is signed.  We gather that apart from Faber, two other concession holders are also experiencing the same situation. Despite the prolonged delay in renewing its concession, we reiterate our view that Faber would eventually get the concession renewed, supported by its vast experience and solid track record.

Maintain Trading Buy. We maintain our forecast and Trading Buy recommendation on Faber at an unchanged FV of RM2.34, based on a 10% discount to our SOP valuation. Our FY12  and FY13  forecasts are  premised on the assumption that the concession would be renewed based on the existing terms.

Source: OSK