FAJARBARU Builder Group Bhd, a Second Board-listed small contractor, is poised to soon leap into the league of mid-sized construction companies in the country.
RHB Research Institute said strong in the construction of air, land and rail transportation-related infrastructure, Fajarbaru was a strong contender for various work packages of the RM2 billion permanent low-cost carrier terminal (LCCT) at KLIA project.
It said this was given the tremendous experience, technical knowledge and skills it had amassed from carrying out phases one and two of the temporary LCCT project.
“We believe these will give Fajarbaru an advantage over competitors when it comes to accuracy of project costing, and hence competitiveness of its bids,” RHB Research said in report yesterday.
It initiated coverage on Fajarbaru with an outperform recommendation.
It said Fajarbaru’s order book was spared the risk of project suspension and cancellation in the Gulf states as it was made up entirely of local jobs. Also, the order book is high-yielding, as the key contracts were mostly secured recently at “new” prices.
The research outfit added that Fajarbaru’s cash-generating ability was highly superior, as evidenced in its enviable balance sheet with a net cash of RM87.6 million or 64.5 sen per share as at end-March 2009.
“We believe this is a result of the highly stringent criteria it adheres to when it comes to bidding for new contracts. Fajarbaru focuses on public jobs as well as work packages from government-controlled enterprises such as Malaysia Airports,” RHB Research said.
Nevertheless, RHB Research cautioned that the risks included new contracts secured in FYE June 2010-2011 coming in below the target of RM400 million per annum; and resurgence in input costs.
RHB Research is cautious on the construction sector, but with Fajarbaru’s trading at seven to eight times the fully diluted calendar year 2010 earnings per share of 14.5 sen, it sees tremendous value in the company.
The research house has an indicative fair value of RM1.45 for Fajarbaru based on 10 times the fully diluted CY2010 EPS of 14.5 sen, at the high end of its benchmark one-year forward target PER for the construction sector to reflect its superior balance sheet strength.
RHB Research Institute said strong in the construction of air, land and rail transportation-related infrastructure, Fajarbaru was a strong contender for various work packages of the RM2 billion permanent low-cost carrier terminal (LCCT) at KLIA project.
It said this was given the tremendous experience, technical knowledge and skills it had amassed from carrying out phases one and two of the temporary LCCT project.
“We believe these will give Fajarbaru an advantage over competitors when it comes to accuracy of project costing, and hence competitiveness of its bids,” RHB Research said in report yesterday.
It initiated coverage on Fajarbaru with an outperform recommendation.
It said Fajarbaru’s order book was spared the risk of project suspension and cancellation in the Gulf states as it was made up entirely of local jobs. Also, the order book is high-yielding, as the key contracts were mostly secured recently at “new” prices.
The research outfit added that Fajarbaru’s cash-generating ability was highly superior, as evidenced in its enviable balance sheet with a net cash of RM87.6 million or 64.5 sen per share as at end-March 2009.
“We believe this is a result of the highly stringent criteria it adheres to when it comes to bidding for new contracts. Fajarbaru focuses on public jobs as well as work packages from government-controlled enterprises such as Malaysia Airports,” RHB Research said.
Nevertheless, RHB Research cautioned that the risks included new contracts secured in FYE June 2010-2011 coming in below the target of RM400 million per annum; and resurgence in input costs.
RHB Research is cautious on the construction sector, but with Fajarbaru’s trading at seven to eight times the fully diluted calendar year 2010 earnings per share of 14.5 sen, it sees tremendous value in the company.
The research house has an indicative fair value of RM1.45 for Fajarbaru based on 10 times the fully diluted CY2010 EPS of 14.5 sen, at the high end of its benchmark one-year forward target PER for the construction sector to reflect its superior balance sheet strength.