News Fajarbaru announced that it had received a contract
letter of acceptance worth RM13.7m from Malaysia Airport
Holdings (MAHB) to
supply Visual Docking Guidance System (VDGS) to MAHB for KLIA2, which
includes the works of installation, testing,
and commissioning of the system.
Comments The contract will be completed in 11 months
time and a big chunk of the contract value will be recognised in FY13 earnings.
Assuming a 6% pre-tax margin, the contract will contribute
RM0.6m to our FY12E and FY13 earnings estimates.
We are neutral on the news as the contract size of RM13.7m
is insignificant to our FY12E estimate.
Outlook Fajar’s outstanding order book currently
stands at RM900m, which will provide earnings visibility up to
FY15. We believe
that Fajarbaru is
still in the running for the MRT
station and depot works based on its proven track record and healthy financials.
There are about eight more packages for stations (ST1 – ST8) and one package
(DPT2) for depot that have yet to be awarded. We expect these contract awards
to be announced in the coming near term (3 to 6 months).
Forecast We are maintaining our FY12E and FY13E earnings
forecasts of RM15.8m and RM27.1m, respectively, given minimal earnings impact (c.2%)
from the above contract.
Rating MAINTAIN OUTPERFORM
With an upside of about 41% from the current price, we are
maintaining our OUTPERFORM rating on Fajarbaru.
Valuation No changes to our TP of RM1.27, which is
based on 9.0x PER to FY13E EPS.
Risks Delay in LRT works by the main contractors.
Escalating building material prices.
Source: Kenanga
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