INVESTMENT MERIT
• 9M12 results comment. Of late, Faber reported a 9M12
revenue and net profit of RM623.7m and RM55.0m, respectively. The 9-month net profit
accounted for 75.5% of the consensus estimate and 78.1% that of ours. We are
upbeat on this good set of results.
• In 3Q12, we saw higher progress billings from Vila Prima
in Taman Desa while Integrated Facilities Management (“IFM”) Concession recorded
a lower revenue from its clinical waste management services and linen and
laundry services due to the lower bed occupancy rates. The lower rates are
comprehendible as patients tend to postpone elective medical procedures during
Ramadan and the Hungry Ghost Festival.
• Segmental breakdown. During the quarter, IFM accounted for
90% of the group’s revenue and pre-tax profit with the property division contributing the remaining
10%. 71% of IFM’s revenue and 54% of IFM’s pre-tax profit were attributed to
its concession business. As we mentioned before, while the group has yet to
secure a concession renewal, it is still business as usual here.
• Achievement of the headline KPI. The group has set two
main KPIs early this year - Revenue Growth of 10%-12% and Return on Equity (“ROE”)
of 15%-17%. During the first 9 months, the group recorded an annualised revenue
growth of -5.5% and ROE of 10.9%. These figures were lower than its KPIs. We
understand that the negative annualized revenue growth was mainly due to the
delay in the commencement of the IFM’s Non-concession new projects and the
timing on the progress billings for the property development projects. Efforts
are being intensified to improve contributions from all the business divisions
and management reckoned that the current negative annualized revenue growth
will narrow for the full year results. In any case, the group expects to meet
its targeted ROE for the year. We share this belief as this is not entirely
impossible, especially with a good dividend payout.
• 20 sen special dividend.
True enough, Faber has recommended a special interim dividend of 20 sen
less 25% tax, translating into a net yield of 10%. Apart from improving the
ROE, the move is also inline with the group’s aspiration to increase its
dividend payout after paring down its RM77.58m loan stocks in 3Q12, which we
had highlighted earlier. As such, the stock is still able to offer an
attractive dividend yield despite its recent upswing.
• One of the cheapest healthcare stocks in town. Faber is
currently trading at 8.8x FY11A PER and 7.8x FY12E PER, which are undemanding compared
to the small cap healthcare and waste management stocks’ FY11-FY12 PER of
9x-10x. We reiterate our Trading Buy call with an unchanged target Price of
RM1.81.
TECHNICALS
• Resistance: RM1.57 (R1), RM1.66 (R2)
• Support: RM1.36 (S1), RM1.26 (S2)
• Comments: After
rebounding from the RM1.26 support, the share price now appears to be facing
strong resistance at the doward sloping trend line. The MACD indicator is supportive
of a move higher, and should the trend line resistance be taken out, FABER
could potentially look to test the RM1.66 and RM1.80 levels next.
BUSINESS OVERVIEW
Faber Group Bhd was formed through a merger between Merlin
Hotels Malaysia Bhd and Faber Union Sdn Bhd in 1972 and later on was established
as Faber Group in 1990. It is now a leading player in the Integrated Facilities
Management (IFM) and has expanded into the Property Development Sector.
The group provides IFM services to hospitals, commercial and
residential properties both in the public and private sectors and is Malaysia’s
largest Hospital Support Services company for over 70 government hospitals and
400 healthcare institutions.
It also has a growing property solution division that has
established itself in the Taman Desa development region and is now actively expanding
its portfolio. Faber Group currently extends its services to hospitals and
hotels in Singapore, Indonesia, Dubai, Abu Dhabi and several parts of India.
BUSINESS SEGMENTS
Integrated Facilities Management: Biomedical engineering maintenance services,
Cleansing Services, Clinical Waste
Management Services, Facility Engineering Maintenance Services, Linen and Laundry
Services, Maintenance Management Information Systems Property Development:
Condominium, Commercial and Residential developments. Completed portfolio
includes developments in Taman Desa (current projects are Armada Villa and
Villa Prima); Laman Rimbunan, Kepong (Areca Residence) and East Malaysia.
Source: Kenanga
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