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Friday, October 28, 2011

FABER - Gets 6-Month Extension (OSK)

Yesterday Faber Group announced that its wholly-owned subsidiary, Faber Medi-Serve SB (FMS), had received a letter dated 27 Oct 2011 from the Public-Private Partnership Unit of the Prime Minister's Department, stating that FMS shall continue with the existing Hospital Support Services (HSS) concession for an interim period of 6 months, subject to the prevailing terms and conditions of the concession commencing 28 Oct 2011, or until the signing of a new concession agreement for privatization of HSS with the Ministry of Health, whichever is the earlier. The 6-month interim extension is not to be considered as binding on the Government of Malaysia.

Maintain Trading Buy. We reiterate our view that despite the delay, Faber would eventually get its concession renewed, going by its strong 15-year track record since the concession started on 28 Oct 1996. We maintain our Trading Buy recommendation on Faber, with an unchanged FV of RM2.57, based on SOP valuation. This valuation is based on the assumption that that the concession will be renewed for another 10 years based on the same terms and conditions in the existing concession.

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