PP 7767/09/2010(025354)

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
6 August 2010
MARKET DATELINE

Faber Share Price

Fair Value
:
:
RM2.79
RM3.82
Non-concession IFM Boosted 2QFY10 Earnings Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (FAB; Code: 1368) Bloomberg: FAB MK

Net Core Core EPS Core Net
FYE Turnover Profit EPS EPS Growth PER C.EPS P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (%) (%) (%)
2009 805.3 82.7 22.8 22.8 35.3 12.2 - 2.9 net cash 23.4 2.2
2010f 928.0 95.3 26.3 26.3 15.3 10.6 27.0 2.4 net cash 22.3 2.5
2011f 911.3 95.7 26.4 26.4 0.5 10.6 24.0 2.0 net cash 19.1 2.9
2012f 1422.3 166.1 45.7 45.7 73.5 6.1 43.0 1.6 net cash 27.2 3.0
Main Market Listing /Trustee Stock/Syariah Approved Stock By The SC #Excluding EI * Consensus Based On IBES Estimates

♦ 2Q10 net profit grew 134.5% yoy. 2QFY12/10 net profit of RM32.5m RHBRI Vs. Consensus
Above
(+134.5% yoy) came in within our and consensus expectations with
√ In Line √
1HFY10 net profit of RM46.7m (+121.9% yoy) accounting for 48% of our
Below
and consensus full-year estimates respectively. As expected, no dividend
was declared during the quarter. Issued Capital (m shares) 363.0
Market Cap(RMm) 1,030.9
♦ Qoq, earnings grew by 125.6%. Qoq, IFM revenue grew 37.3% on the Daily Trading Vol (m shs) 1.2
back of the higher contribution from the overseas IFM segment, as non- 52wk Price Range (RM) 1.00-3.00
concession revenue grew by 116.7% qoq. Recall that an IFM contract in Major Shareholders: (%)
Madinat Zayed, Abu Dhabi was renewed in May for another year with an UEM Group 34.0
Universal Trustee 23.4
annual value of RM57.8m. Faber also recognised higher revenue from the
property segment of RM20.5m (vs. RM2.0m in 1Q10) due to higher
progress billings from the Armada Villa Phase 1A in Taman Desa, which FYE Dec FY10F FY11F FY12F
was launched in Apr 2010. Consequently, 2Q10 earnings grew by 125.6% EPS chg (%) (1.0) 9.0 5.4
qoq. Var to Cons (%) (1.7) 0.8 0.9

♦ Risks to our view. 1) Failure to secure an extension to the concession PE Band Chart

agreement with the Government; and 2) Delays in property launches and

approvals, which could affect revenues from the property segment. PER = 11x
PER = 7x
PER = 3x
♦ Forecasts. Although 2HFY10 earnings came in within our and consensus
expectations, we have revised our FY10-12 revenue projections slightly by
0.6-5.9% to reflect the higher projected non-concession IFM business. We
have, however, revised our FY10 property revenue to RM79.6m (vs.
RM137.8m previously) but maintained our FY10-12 revenue projections,
in-line with management’s expectations. As a result, our FY10/FY11/FY12 Relative Performance To FBM KLCI
net profit forecasts have been revised to RM95.3m/RM95.7m/RM166.1m
(vs. RM96.3m/RM87.8m/RM157.5m previously) respectively. Faber

♦ Investment case. Following the earnings revision above as well as

updating Faber’s net cash position as at Jun, our fair value for Faber has
been raised to RM3.82 from RM3.54 (based on SOP valuation). We FBM KLCI
continue to like Faber for its resilient earnings derived from the concession
business, together with its ongoing expansion plans for its non-concession
business locally and overseas. We reiterate our Outperform call on the
stock.
Yap Huey Chiang
(603) 92802179
yap.huey.chiang@rhb.com.my
Please read important disclosures at the end of this report.

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 6 August 2010

Table 2. Earnings review

Qoq Yoy 6M 6M YoY
FYE Dec (RMm) 2Q09 1Q10 2Q10 Comments
(%) (%) FY09 FY10 (%)
142.8 181.9 249.7 37.3 74.8 274.8 431.5 57.0
IFM Yoy growth due to increase in
both concession and non-
concession segments. Increase in
qoq was due to higher revenue
from new overseas IFM contract.
27.7 2.1 20.5 +>100 (25.7) 36.6 22.7 (38.1)
Property Qoq, higher revenue due to
higher progress billings from
Armada Villa Phase 1A in Taman
Desa. 6MFY10 decline was mainly
due to lower progress billings
from Laman Rimbunan, which
had earlier been recognised in
1HFY09.
Revenue 170.5 184.0 270.2 46.9 58.5 311.4 454.2 45.9

Cost of sales (118.9) (130.5) (204.2) 56.5 71.7 (219.5) (334.7) 52.5
Gross profit 51.6 53.5 66.0 23.4 28.1 91.9 119.5 30.0
Op income 1.5 1.5 2.1 40.8 45.6 3.0 3.6 (16.2)
Other expenses (20.1) (23.9) (16.5) (31.1) (17.8) (41.3) (40.4) 2.0

EBITDA 32.9 31.1 51.7 66.3 56.8 53.7 82.7 35.1

EBITDA margin (%) 19.3 16.9 19.1 17.2 18.2
Depreciation/amort (4.9) (5.6) (5.6) (0.1) (11.9) (10.0) (11.1) (9.7)
EBIT 28.0 25.5 46.1 80.7 64.4 43.7 71.6 64.0
EBIT margin (%) 16.5 13.9 17.1 14.0 15.8

(1.7) (1.6) (1.7) 1.5 (0.1) (3.2) (3.3) 2.4

Finance cost Total debt as at 2Q10 was
RM175.8m against 1Q10 of
RM174.3m and 2Q09 of
RM182.8m
Pre-tax profit 26.4 23.9 44.4 86.1 68.5 40.4 68.3 68.9
Tax (8.1) (4.7) (5.0) 4.9 (38.4) (12.9) (9.7) (24.7)
30.5 19.8 11.2 31.8 14.2
Eff tax rate (%) 2Q10 effective tax rate remains
below statutory rate mainly due
tax-free status of the UAE
operations.
Minorities (4.5) (4.8) (7.0) 47.6 56.5 (6.5) (11.8) 81.6
Net profit 13.8 14.4 32.5 +>100 +>100 21.1 46.9 +>100
Source: Company data, RHBRI

Table 3. Sum Of Parts Calculation

Valuation basis FV (RMm) Per share (RM)
Concession IFM DCF 658.9 1.82
Non-Concession IFM 14x FY10 earnings 476.5 1.31
Property DCF 76.9 0.21

Add : Net cash (End-2QFY10) 172.8 0.48

SOP 1,385.1 3.82
Shares (m) 363.0
Source: Company data, RHBRI estimates

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Table 4. Earnings Forecasts Table 5. Forecasts Assumptions
FYE Dec (RMm) FY09a FY10f FY11f FY12f FYE Dec (RMm) FY10f FY11f FY12f
Turnover 805.3 928.0 911.3 1,422.3 Revenue:
Turnover growth (%) 20.2 15.2 (1.8) 56.1 Concession 544.1 562.2 543.5
EBITDA 169.0 193.6 188.7 309.7 Non-concession 304.2 349.1 383.8
EBITDA margin (%) 21.0 20.9 20.7 21.8 Property 79.6 0.0 495.0
Dep & Amort (21.0) (23.0) (24.7) (26.4)
EBIT 148.0 170.6 164.0 283.2
EBIT margin (%) 18.4 18.4 18.0 19.9 EBIT:
Net interest expense (6.7) (6.7) (6.7) (6.7) Concession 97.9 101.2 97.8
Associates (0.3) 0.0 0.0 0.0 Non-concession 54.8 62.8 69.1
Pretax Profit 140.9 164.0 157.4 276.6 Property 17.9 0.0 116.3
Tax (34.8) (41.0) (33.0) (58.1)
Minorities (23.4) (27.7) (28.6) (52.4)
Net Profit 82.7 95.3 95.7 166.1
Core net profit 82.7 95.3 95.7 166.1
Core Growth (%) 69.7 15.3 0.5 73.5
Source: Company Data, RHBRI estimates Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or
more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take
on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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