Monday 28 May 2012

Naim Holdings - 1Q boost in construction margins BUY


- Maintain BUY on Naim Holdings with an unchanged fair value of RM2.88/share. This is pegged to a discount of 20% to its sum-of-parts value. 

- Naim reported a net profit of RM16mil for 1QFY12 against total turnover of RM94mil. As expected, no dividend was declared for the quarter.

- While its results constituted 29% of our full-year estimates (consensus: 21%), we deem it to be in line as the quarter was boosted by a step-up in margin recognition following the near completion of certain construction projects. 

- After some initial hiccups, progress on the Sabah Oil & Gas terminal project has gathered pace, hitting 51% as at 31 March 2012. 

- As a result, construction EBIT margin improved to 7.1% against a loss in 4QFY11. But, we expect margins to normalise in the coming quarter and we have projected 4.8% for the whole of FY12F.

- Naim is stepping up its order book replenishment, and is bidding for over RM2bil worth of new projects. 

- Oil & gas associate Dayang recorded higher contributions of RM5.5mil against RM4.3mil a year earlier (+27% QoQ). 

- Similarly, the group recorded new property sales of RM66mil in 1QFY12 – almost one-third the whole of FY11. New launches in the pipeline include an integrated development at the old Bintulu Airport.   

- Apart from several infrastructure projects in Sarawak, we understand that Naim is also gunning for some of the work packages under the Sg.Buloh-Kajang MRT project – of which the group has been pre-qualified under the Bumi category.

- Naim is also taking strategic steps to boost its recurring income base via a tie-up with the KPJ group to develop a new hospital in Miri within its existing Bandar Permyjaya township. 

- Naim is to own a 30% stake in the JV, and would also undertake the construction of the hospital estimated to cost ~ RM70mil. Pending further details, we have yet to include any contributions from this new venture.  

Source: AmeSecurities

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