PP 7767/09/2010(025354)

1 April 2010

Malaysia Corporate Highlights

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

Com pany Upda te

1 April 2010
MARKET DATELINE

Faber Share Price

Fair Value
:
:
RM2.38
RM3.30
Still A Good Buy Recom : Outperform
(Maintained)

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

Net Core EPS Net
FYE Turnover Profit EPS Growth PER C.EPS P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (%) (%) (%)
2009 805.3 82.7 22.8 35.3 10.4 - 2.4 net cash 23.4 2.5
2010f 922.6 96.3 26.5 16.4 9.0 27.0 2.0 net cash 22.5 2.9
2011f 839.0 87.8 24.2 -8.8 9.8 31.0 1.7 net cash 17.6 3.4
2012f 1343.0 157.5 43.4 79.3 5.5 30.0 1.4 net cash 26.3 3.6
Main Market Listing /Trustee Stock/Syariah Approved Stock By The SC #Excluding EI * Consensus Based On IBES
E i
♦ Changes made to our FY10-12 earnings forecast. We have relooked at
our FY10-12 earnings forecast for Faber and have made the following Issued Capital (m shares) 363.0
adjustments: Market Cap (RMm) 863.9

o Effective tax rate assumption. As guided by the management, our Daily Trading Vol (m shs) 1.0
52wk Price Range (RM) 0.748-2.48
previous FY10-12 effective tax rate assumption of 29% p.a. was too
Major Shareholders: (%)
high. Consequently, we have revised our FY10 effective tax rate to
UEM Group 34.3
statutory tax rate of 25%. We have, however, reduced our FY11 and Universal Trustee 23.4
FY12 effective tax rate to 21% p.a., to reflect the higher contribution
from UAE which is tax-free.
FYE Dec FY10 FY11F FY12F
o Impact of FRS convergence. According to the new Financial
EPS chg (%) 8.3 (18.7) 38.5
Reporting Standard (FRS) IFRIC13, revenue for property projects can
Var to Cons (%) (1.5) (22.0) 44.6
only be recognised upon completion of construction, instead of progress
billing previously (source: Pricewaterhouse Coopers). Given that Faber PE Band Chart
will be adopting the new FRS standards from 1 Jan 2011 onwards, we
have maintained our FY10 property forecast. For FY11, to be consistent
PER = 11x
with the new FRS, we have removed our revenue projections for the PER =7x
property segment. However, FY12 revenue forecast has been increased PER = 3x

by 19% to recognise the total value of completed property projects as

guided by the management.
o Adjustments for 10% drop in concession revenue. As indicated
previously, we have assumed that renewal of the concession in Oct
2011 will come with a 10% drop in service fees. We have corrected the Relative Performance To FBM KLCI
error in our assumption to reflect the price drop from 1 Nov 2011
instead of 1 Jan 2011. The impact to DCF is minimal.
♦ Risks to our view. 1) Failure to secure an extension to the concession
Faber

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

approvals, which could affect revenues from the property segment.
FBM KLCI
♦ Forecasts. Following the above changes, we have revised our FY10
earnings projection upward by 8.3% but reduced our FY11 numbers by
18.7%. Our FY12 earnings forecast has been raised by 38.5%.
♦ Investment case. Besides the change in the earnings forecast, we have
also switched our valuation methodology for property segment from PE to
DCF in line with the sector. However, this has minimal impact on our SOP
valuation (see Table 2), which is maintained at RM3.30. We see very little
risk for Faber to lose its concession agreement. As seen in Table 3, even if
the concession is not renewed, our “worst-case” SOP valuation will amount
to RM2.18, i.e. 9.2% below the current share price. Our forecast and fair Yap Huey Chiang
value estimate do not include Pantai Medivest but we believe Faber stands (603) 92802179
a good chance of acquiring it given the strong financial position and good yap.huey.chiang@rhb.com.my
track record. We thus reiterate our Outperform call on the stock.

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Table 2. Sum Of Parts Calculation

Valuation basis FV (RMm) Per share (RM)
Concession IFM DCF 658.9 1.82
Non-Concession IFM 14x FY10 earnings 328.4 0.91
Property DCF 85.9 0.24

Add : Net cash (End-4QFY09) 125.1 0.34

SOP 1,198.4 3.30
Shares (m) 363.0
Source: Company data, RHBRI estimates

Table 3. “Worst-Case” Sum Of Parts Calculation If The Concession Is Not Renewed

Valuation basis FV (RMm) Per share (RM)
Concession IFM Net assets 250.0 0.69
Non-Concession IFM 14x FY10 earnings 328.4 0.91
Property DCF 85.9 0.24

Add : Net cash (End-4QFY09) 125.1 0.34

SOP 789.4 2.18
Shares (m) 363.0
Source: Company data, RHBRI estimates

Table 4. Earnings Forecasts Table 4. Forecasts Assumptions

FYE Dec (RMm) FY09a FY10f FY11f FY12f FYE Dec (RMm) FY10f FY11f FY12f
Turnover 805.3 922.6 839.0 1,343.0 Revenue:
Turnover growth (%) 20.2 14.6 (9.1) 60.1 Concession 544.1 562.2 543.5
EBITDA 169.0 195.3 175.7 295.4 Non-concession 240.7 276.8 304.5
EBITDA margin (%) 21.0 21.2 20.9 22.0 Property 137.8 0.0 495.0
Dep & Amort (21.0) (23.0) (24.7) (26.4)
EBIT 148.0 172.3 151.0 269.0
EBIT margin (%) 18.4 18.7 18.0 20.0 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 43.3 49.8 54.8
Pretax Profit 140.9 165.6 144.4 262.3 Property 31.0 0.0 116.3
Tax (34.8) (41.4) (30.3) (55.1)
Minorities (23.4) (27.9) (26.2) (49.7)
Net Profit 82.7 96.3 87.8 157.5
Core net profit 82.7 96.3 87.8 157.5
Core Growth (%) 69.7 16.4 (8.8) 79.3
Source: Company Data, RHBRI estimates 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.

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of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
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“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
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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
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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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securities, subject to the duties of confidentiality, will be made available upon request.

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