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Monday, February 28, 2011

Faber - Maintain Trading Buy at a lower TP (OSK)

Despite the rather disappointing results, we are reducing our FY11 forecast by only 4.7%, supported by our expectation of strong contributions from its property division for FY11, driven by its on-going projects in Taman Desa and Laman Rimbunan. We maintain our TRADING BUY recommendation at a lower TP of RM3.02 from RM3.39 after some downward adjustments (i.e. lowering the net cash position and PER multiple for its non-concession business) in our SOP valuation.

We still think that Faber should get its existing concession renewed in view of its track record and excellent execution of the existing concession, which should provide the upward catalyst for its share price. Despite the uncertainty over the concession renewal, our FY12 numbers are based on the assumption that the concession will be renewed based on the current rate and scope of the existing concession.

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