Written by Financial Daily
Monday, 17 August 2009 11:24
KENANGA Research has reiterated its buy call on Fajarbaru Builder Group Bhd at RM1.28 with an unchanged target price of RM1.46 based on nine times price-earnings ratio (PER) FY09.
Commenting on the company’s proposed 10% private placement announced last Thursday, which is expected to raise up to RM15.2 million, the research house said the new subscribers and price have yet to be confirmed and that it was likely to be taken up by third party.
“We were quite surprised with the announcement as we do not expect any placement exercise in the near term except for the five years warrant conversion.
“Nevertheless, we take this news as positive as we suspect the group is buckling up cash to undertake incoming projects, including the new LCCT and other government jobs worth at least RM1 billion for the next two years,” it said.
Kenanga said that as at 1Q09, Fajarbaru’s balance sheet has been in a very healthy position that is debt free with cash per share of 64 sen.
“Given that, the enlarged shareholder’s fund post placement will further strengthen its balance sheet to gear up for bigger contracts. We envisaged the net gearing after taking up at least RM180 million debt would be around one time which is still manageable for a mid-cap CONSTRUCTION [Not Available] company,” it said.
The research said that based on its estimates, the placement, however, might dilute EPS by 9%.
It expected new contract awards were in the offing, that is, the new LCCT contracts by end-September and ongoing tenders for government related projects worth at least RM500 million that would offer much better upside on the earnings for the next two years.
“With the FY09 results coming out soon, we are quite comfortable with our full-year FY09 expectations as most of the contracts still on track.
“The reported margin in 3Q09 was slightly above our forecast as we assume higher building material cost and lower margin from government related contracts. We expect the group to still have unbilled contracts of RM450 million by end of FY09,” it said.
Fajar Baru closed five sen down at RM1.23 last Friday.
Monday, 17 August 2009 11:24
KENANGA Research has reiterated its buy call on Fajarbaru Builder Group Bhd at RM1.28 with an unchanged target price of RM1.46 based on nine times price-earnings ratio (PER) FY09.
Commenting on the company’s proposed 10% private placement announced last Thursday, which is expected to raise up to RM15.2 million, the research house said the new subscribers and price have yet to be confirmed and that it was likely to be taken up by third party.
“We were quite surprised with the announcement as we do not expect any placement exercise in the near term except for the five years warrant conversion.
“Nevertheless, we take this news as positive as we suspect the group is buckling up cash to undertake incoming projects, including the new LCCT and other government jobs worth at least RM1 billion for the next two years,” it said.
Kenanga said that as at 1Q09, Fajarbaru’s balance sheet has been in a very healthy position that is debt free with cash per share of 64 sen.
“Given that, the enlarged shareholder’s fund post placement will further strengthen its balance sheet to gear up for bigger contracts. We envisaged the net gearing after taking up at least RM180 million debt would be around one time which is still manageable for a mid-cap CONSTRUCTION [Not Available] company,” it said.
The research said that based on its estimates, the placement, however, might dilute EPS by 9%.
It expected new contract awards were in the offing, that is, the new LCCT contracts by end-September and ongoing tenders for government related projects worth at least RM500 million that would offer much better upside on the earnings for the next two years.
“With the FY09 results coming out soon, we are quite comfortable with our full-year FY09 expectations as most of the contracts still on track.
“The reported margin in 3Q09 was slightly above our forecast as we assume higher building material cost and lower margin from government related contracts. We expect the group to still have unbilled contracts of RM450 million by end of FY09,” it said.
Fajar Baru closed five sen down at RM1.23 last Friday.