Faber by OSK

Faber’s 1HFY12 net profit made up 47% and 56% of our and consensus’ FY12
forecasts. The numbers  matched  our estimates as we anticipated  a  stronger 
showing  in  2HFY12, especially from its property division. We maintain our 
forecast and Trading Buy recommendation, at an unchanged FV of RM2.34, based 
on a 10% discount to our SOP valuation. Despite the prolonged delay in renewing 
its hospital support services (HSS) concession, we hold  firm to our view that a 
renewal is forthcoming given Faber’s vast experience and good track record.
Within expectations. Faber’s net profit of RM36.0m for 1HFY12 accounted for about 
47% and 56% of our and consensus FY12 forecasts respectively. While the  numbers 
beat consensus projections, these were in line with our expectation as our forecast was 
for  better performance in 2HFY12, attributed to heightening activities in relation to its 
HSS concession and higher progress billings at its property division. Revenue ticked up 
by 4.5% y-o-y as the absence of contribution from its IFM contracts in Abu Dhabi - which 
were terminated  in mid-2011 - was  mitigated by the  robust  revenue growth from its 
property division. This division’s revenue surged  49% y-o-y owing to higher progress 
billing from the ongoing development on Phases 4 and 5 of its Laman Rimbunan project. 
Meanwhile, group net profit was 17.4% higher y-o-y, in line with the higher revenue as 
well as  improved margins, boosted by contribution from the property division, which 
generally fetches margins than its IFM business. Consequently, EBIT margin widened to 
16.9% in 1HFY12 from 15.0% in 1QFY11. 
Still no sign of contract renewal. When Faber’s 15-year HSS concession expired on 
28 Oct 2011, the Government had extended the concession period for 6 months up to 
28 April 2012. However, on 27 April 2012, Faber was informed that the company will 
continue to execute the existing concession until a new one is signed. We gather that 
apart from Faber, two other concession holders are also facing the same situation. We 
believe  that Faber has done what is needed to  secure  a  renewal but the decision 
ultimately rests with  the  Government. Despite the prolonged delay in renewing  the 
concession, we reiterate our view that the company would eventually renew it, especially 
in view of its vast experience and solid track record. 
Maintain Trading Buy. We maintain our forecast and Trading Buy recommendation on 
Faber at the unchanged FV of RM2.34, based on a 10% discount to our SOP valuation. 
Our FY12 and FY13 forecasts are premised on the assumption that the concession 
would be renewed based on the existing terms. At the current price, the stock trades at 
6.1x FY12 and 5.6x FY13 earnings and offers an attractive dividend yield of 6.2%.