We recently organized a luncheon talk featuring Naim and its 36% associate, Dayang. Naim holds 2 LOIs, which are for the Kuching flood mitigation project and college equipment supplies. Other potential jobs are a resettlement village, affordable housing and road works. The company has also been offered a USD100m road rehabilitation contract in Fiji which it has yet to accept. Its property division, which is targeting higher sales for FY10, may see some upcoming property management ventures. Earnings surprises could come from Dayang, which recently acquired Borcos. Naim remains our top pick for Sarawak’s construction plays.
Maintain BUY, RM3.93 TP. Given our increased optimism, we are raising our target PER multiplier for
Naim’s earnings to 11x from 10x. Our newly revised RM3.93 TP is based on a 2-stage Sum-of-Parts method involving:
(i) 11x FY10 earnings (ex-Dayang’s contribution), and
(ii) 9x its share of Dayang’s profits.
Imputing the acquisition impact of Borcos will boost our TP to RM4.26.
Naim remains our top pick
for Sarawak construction exposure.
