PP 7767/09/2010(025354)

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

R e su l ts N o t e 29 April 2010
MARKET DATELINE

Fajarbaru Builder Group Share Price

Fair Value
:
:
RM1.06
RM1.31
9MFY06/10 Net Profit Jumps 42% YoY Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (FAJAR; Code: 7047) Bloomberg: FBC MK

Net FD Net
FYE Turnov Profit# EPS# Growth PER EPS# C.EPS* P/CF P/NTA ROE Gearing GDY
Jun (RMm) (RMm) (sen) (%) (x) (sen) (sen) (x) (x) (%) (%) (%)
2009 184.6 18.1 15.2 56.3 7.0 - - 3.3 1.3 17.8 Cash 5.2
2010f 176.4 22.4 13.6 (10.1) 7.8 11.6 - 17.8 1.5 19.0 Cash 5.2
2011f 263.0 28.0 16.1 18.1 6.6 14.5 - 12.2 1.3 20.2 Cash 5.2
2012f 374.0 35.9 19.5 21.2 5.4 18.5 - 8.6 1.2 21.5 Cash 5.2
Main Market Listing /Non-Trustee Stock /Syariah-Approved Stock By The SC #Excluding EI * Consensus Based On IBES

RHBRI Vs. Consensus

♦ No issue. 9MFY06/10 net profit came in within our expectation at 76% of Above -
our full-year forecast. In Line -

♦ Better job flow in FY06/11. Among the new projects Fajarbaru is Below -

currently eyeing/tendering are the RM400m teaching-hospital in Kuantan Issued Capital (m shares) 166.2
based on the private finance initiative (PFI) model, the remaining work Market Cap(RMm) 176.2
packages of the new LCCT including parking apron (RM200m), taxiway Daily Trading Vol (m shs) 0.7
(RM100m) and runway (RM400-500m), a bridge/road project in Peninsula 52wk Price Range (RM) 0.84-1.25
Malaysia and the LRT line extension project. The winning bids for these jobs Major Shareholders: (%)
are likely to be announced from 2H2010. Big Victory Holdings 13.3
Dato’ Ir Kuan Peng Ching 9.4
♦ Forecasts. Maintained. Dato’ Ir Low Keng Kok 7.3

♦ Risks. The risks include: (1) New contracts secured in FY06/11-12 coming in FYE Jun FY10 FY11 FY12
below our target of RM400m per annum; and (2) Rising input costs. EPS Revision (%) - - -

♦ Improved investors’ risk appetite. We are now more upbeat on the Var to Cons (%) - - -

construction sector, prompted largely by investors’ improving risk appetite PE Band Chart
for construction stocks following: (1) The massive underperformance of the
sector vis-à-vis the market in 4Q2009 and 1Q2010; and (2) A better sector PER = 10x
PER = 8x
news flow and new expectations leading up to the announcement of the 10th PER = 6x
Malaysia Plan (10MP) in June 2010.
♦ Maintain Outperform. Fajarbaru is a good proxy to the construction sector
due to its still undemanding valuations. Its balance sheet is strong with a
net cash of RM123.7m as at 31 Mar 10, translating to a whopping
74sen/share. Indicative fair value is RM1.31 based on 10x fully-diluted CY10
EPS of 13.1sen, in line with our benchmark 1-year forward target PER for the Relative Performance To FBM KLCI

construction sector of 10-14x.

Fajarbaru Builder

FBM KLCI

Joshua CY Ng
(603) 92802151
Please read important disclosures at the end of this report.
joshuang@rhb.com.my

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 Table 2: Earnings Review (YoY Cumulative)
FYE Jun 2009 2010 YoY Observations/Comments
(RMm) 9M 9M Chg
Turnover 129.5 121.3 (6%)
Construction 129.5 121.3 (6%) One key new project, i.e. Tampin Hospital, had yet to hit significant
billing milestones.
Others 0.0 0.0 nm
EBIT 12.8 20.6 61%
Construction 11.8 19.6 67% Driven largely by margin expansion.
Others 1.0 1.0 (5%)
Net inc/(exp) 1.0 1.5 43% Rising net cash.
Pretax profit 13.8 22.1 60%
Taxation (1.8) (5.1) >100%
Minority interest 0.0 (0.0) nm
Net profit 12.0 17.0 42% Driven largely by margin expansion.
EPS (sen) 10.3 11.3 9%

EBIT margin - Overall 9.9% 17.0% 7.1% pts

EBIT margin - Construction 9.1% 16.2% 7.1% pts Lumpy profit recognition from certain projects at the tail-end.
Pretax margin 10.7% 18.2% 7.6% pts
Effective tax rate 13.2% 23.0% 9.9% pts

Table 3: Earnings Review (QoQ)

FYE Jun 2010 2010 2010 QoQ Observations/Comments
(RMm) 1Q 2Q 3Q Chg
Turnover 40.0 37.8 43.4 15%
Construction 40.0 37.8 43.4 15% Normal quarterly fluctuation in billings.
Others 0.0 0.0 0.0 nm
EBIT 5.1 7.4 8.1 10%
Construction 4.8 7.1 7.7 9% Driven largely by topline expansion.
Others 0.3 0.3 0.4 45%
Net inc/(exp) 0.5 0.5 0.5 (2%)
Pretax profit 5.6 7.9 8.6 9%
Taxation (1.2) (1.8) (2.1) 15%
Minority interest (0.0) 0.0 0.0 nm
Net profit 4.4 6.1 6.6 8% Driven largely by topline expansion.
EPS (sen) 3.2 3.9 4.1 5%

EBIT margin - Overall 12.9% 19.5% 18.7% (0.8% pt)

Lumpy profit recognition from certain projects at the tail-
EBIT margin - Construction 12.1% 18.8% 17.8% (1.0% pt)
end, especially during 2Q
Pretax margin 14.0% 20.8% 19.8% (1.0% pts)
Effective tax rate 21.7% 22.9% 24.0% 1.1% pts

Table 4 : Outstanding Orderbook

Project Outstanding value
(RMm)
Seremban-Gemas double-tacking (KM502.6-KM535.5) 226
Tampin Hospital 131
Aqua-culture project in Terengganu 70
Total 427
Source: Company, RHBRI

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Table 5: Earnings Forecasts Table 6: Forecast Assumptions
FYE Jun (RMm) FY09a FY10F FY11F FY12F FYE Jun FY10F FY11F FY12F

Turnover 184.6 176.4 263.0 374.0 Construction EBIT margin (%) 15.0 13.3 12.1
Turnover growth (%) 110.8 -4.5 49.1 42.2 New orderbook secured (RMm) 70 400 400

EBITDA 20.5 27.1 35.5 45.7

EBITDA margin (%) 11.1 15.3 13.5 12.2

Depreciation -0.6 -0.6 -0.6 -0.6

Net Interest 1.6 2.2 2.5 2.8
Associates 0.0 0.0 0.0 0.0
EI 0.0 0.0 0.0 0.0

Pretax Profit 21.5 28.7 37.4 47.9

Tax -3.4 -6.3 -9.3 -12.0
PAT 18.1 22.4 28.0 35.9
Minorities 0.0 0.0 0.0 0.0
Net Profit 18.1 22.4 28.0 35.9
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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 KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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

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

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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