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Naim Holdings Berhad
• Naim’s 1Q10 earnings were below ours and consensus expectation. Nevertheless, we expect better quarters ahead with continuous contribution from its property division and recovery from its construction division.
• We maintain our forecast earnings for FY10 and FY11, backed by an outstanding orderbook of RM2.7b, notably the Kuching Flood Mitigation project package 1, road works and other infrastructure projects as well as its property projects.
• Our BUY call is maintained with a 12-month target price of RM3.90/share based on sum-ofparts valuation relative to PER approach.
Higher sales contribution. Naim recorded a turnover of RM123.4m, representing an upside of 30%yoy as its property sales jumped significantly as compared to that last year. Its construction division also recorded a higher turnover of 13%yoy.
However, its 1Q10 net profit fell by10%yoy, dragged by the construction division with property being the major contributor. Meanwhile, its associate, Dayang showed positive earnings growth.
RM3.6b contracts in hand. Naim has a total orderbook of RM3.6b with an outstanding orderbook of RM2.7b.
The present orderbook would be able to sustain earnings growth for the next 3-4 years. Management highlighted that they are bidding a few local projects which include the resettlement in Bengoh Dam plus other infrastructure projects to support the development of SCORE. Amongst its existing projects are the RM150m Flood Mitigation Project Phase 1, road works and affordable housing projects for SPNB (RM624m).
It holds LOIs worth RM1.5b for the subsequent phases of Kuching Flood Mitigation, affordable housing and road works.Moving forward, local construction companies which include Naim are expected to clinch infrastructure related works which are expected to be rolled out closer to the Sarawak election by 1Q11.
Reiterate BUY recommendation. We maintain our earnings forecast for FY10 and FY11 with target price of RM3.90 per share based on sum-of-parts valuation relative to PER approach. This suggests potential total returns more than 35% (including 2.7% dividend yield). Our SOP valuation is based on PER of 12.5x, 9.5x and 10x to the net earnings of its 2010 construction, property and oil and gas divisions respectively.
Given positive outlook on the respective divisions, the target PERs are within the average of their respective industry peers.
• Naim’s 1Q10 earnings were below ours and consensus expectation. Nevertheless, we expect better quarters ahead with continuous contribution from its property division and recovery from its construction division.
• We maintain our forecast earnings for FY10 and FY11, backed by an outstanding orderbook of RM2.7b, notably the Kuching Flood Mitigation project package 1, road works and other infrastructure projects as well as its property projects.
• Our BUY call is maintained with a 12-month target price of RM3.90/share based on sum-ofparts valuation relative to PER approach.
Higher sales contribution. Naim recorded a turnover of RM123.4m, representing an upside of 30%yoy as its property sales jumped significantly as compared to that last year. Its construction division also recorded a higher turnover of 13%yoy.
However, its 1Q10 net profit fell by10%yoy, dragged by the construction division with property being the major contributor. Meanwhile, its associate, Dayang showed positive earnings growth.
RM3.6b contracts in hand. Naim has a total orderbook of RM3.6b with an outstanding orderbook of RM2.7b.
The present orderbook would be able to sustain earnings growth for the next 3-4 years. Management highlighted that they are bidding a few local projects which include the resettlement in Bengoh Dam plus other infrastructure projects to support the development of SCORE. Amongst its existing projects are the RM150m Flood Mitigation Project Phase 1, road works and affordable housing projects for SPNB (RM624m).
It holds LOIs worth RM1.5b for the subsequent phases of Kuching Flood Mitigation, affordable housing and road works.Moving forward, local construction companies which include Naim are expected to clinch infrastructure related works which are expected to be rolled out closer to the Sarawak election by 1Q11.
Reiterate BUY recommendation. We maintain our earnings forecast for FY10 and FY11 with target price of RM3.90 per share based on sum-of-parts valuation relative to PER approach. This suggests potential total returns more than 35% (including 2.7% dividend yield). Our SOP valuation is based on PER of 12.5x, 9.5x and 10x to the net earnings of its 2010 construction, property and oil and gas divisions respectively.
Given positive outlook on the respective divisions, the target PERs are within the average of their respective industry peers.
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