- Maintain BUY on Naim Holdings with a lower fair value of RM2.32/share
(previously: RM2.88/share) – pegged to a higher discount (from 20% to 40%) to
its revised sum-of-parts (SOP) value, despite our earnings upgrade. This
reflects a more muted take-off for some of its higher-value property projects
that are being lined up.
- Naim delivered a 9MFY12 net profit of RM76mil, coming ahead
of both consensus and our full-year estimates (89%-93%) even though we expect a
sequentially softer 4Q due to seasonal factors.
- The positive variance against our forecast mainly came from:-
(i) higher-than-expected contributions from oil & gas associate Dayang
Holdings (9MFY12; at RM29mil, was already 92% of our previous FY12F forecast);
(ii) marked improvement in the SOGT job progress (77% done); and (iii) sharply
lower tax rates of 2% in 3QFY12 (9MFY12: 12%).
- Naim recently won two MRT station works worth a combined RM408mil,
taking new job wins to-date to ~RM691mil – close to our FY12F forecast of
RM700mil.
- The group’s current tender book consists of over RM2bil worth
of jobs against an outstanding order flow of ~RM2.3bil (ex-Kuching flood
mitigation project: RM1.2bil).
- Naim is on track to meet our FY12F pre-sales target of RM305mil,
with new sales to-date reaching RM286mil (Bandar Baru Permyjaya: RM250 mil,
Riveria & Desa Ilmu RM27 mil; others RM9 mil).
- On a slightly negative note, the local press revealed over
the weekend that Naim is seeking to appeal a potential downgrade by RAM on its
debt – which we believe relates to its RM500mil Islamic MTN programme. This
comes at a time when Naim is set to embark on some larger-scale property projects
in Sarawak. We are keeping our earnings for now pending more concrete updates
from management.
- That said, Naim remains a strategic mid-to-long term play
on growing housing/property demand within Sarawak’s SCORE. The group is the
largest landbank holder in Sarawak (~2,620 acres) with an estimated GDV of
RM9bil of projects in Kuching, Bintulu and Miri.
- The litmus test is on how it executes the roll-out of key catalyctic projects (e.g. Bintulu
Airport redevelopment, Batu Lintang integrated development), for which launches
have been re-scheduled a couple of times.
- Naim’s aggressive stance to reinvent itself is a
significant shift away from its mostly low/medium-cost residential products on
offer now. This is vital to help narrow the steep 50% discount the stock is
trading at vs. its NAV.
Source: AmeSecurities
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