Dayang will be acquiring a 40% stake in Borcos for RM132m cash. Along with the purchase is a RM65m profit guarantee for FY10, which translates into a forward PER of 5.1x. We view the acquisition positively given the synergistic benefits and earnings enhancement. Factoring in Borcos’ acquisition will raise our FY10–11 earnings estimates for Naim by 7%–11% and bump up our TP to RM3.80. We retain all estimates for now and maintain BUY at a TP of RM3.46.
Fijian flava. Last week, media reports said Naim was offered a US$100m (~RM354m) contract from the Fijian government to rehabilitate a 338km national highway on the main island of Viti Levu. Management indicated that it has yet to accept the offer as there remain issues to be “sorted out”. If accepted, the job would be awarded in 2 packages - of US$60m
and US$40m – taking a total of 5 years to complete. Naim is already undertaking a RM31m road job in Fiji. In our view, unstable politics in Fiji is the key risk. On the domestic front, we expect the company to rope in another RM200m worth of road jobs by year-end.