Friday, June 13, 2008

Faber-licious



The principal activities of Faber are investment holding and provision of management services to its subsidiaries. The principal activities of the subsidiaries are facilities maintenance, provision of food catering and hospital support services, and investment holding. Faber is engaged in developing Taman Danau Desa, a mixed development project in KL. This project comprises condominiums, apartments and shop offices. The company also undertakes to develop a residential project known as Taman Grandview in Sandakan, Sabah. Fabers financial performance is strengthening following higher progress billings by the Property Development Division on its Laman Rimbunan project in Kepong. FABER also provides hospital support services including clinical waste management, cleansing, linen and laundry and bio-medical engineering maintenance services to Malaysian government hospitals via its 59% owned subsidiary, Faber Medi-Serve Sdn Bhd.

Issued capital: 363m

52 week High-Low: 1.86-0.75

The key component in Faber is Faber Medi-Serve which they own 69.96% and it contributes 60% of Faber's PBT. Faber has announced it will acquire the remaining 30% from Medlux Overseas for RM85.5m and the redemption of RM115 RCPs from Jeram Bintang Sdn Bhd. Faber is buying at just 7x 2007 PER for FMS. The cleansing of RCPs would erase the potential 26% dilution effect. Hence the deal is very good for Faber's shareholders.

Faber subsidiary Faber Medi-SERVE Sdn Bhd holds a 15-year concession since 1996 to provide integrated hospital support & facilities management services to 71 hospitals in six states. Faber, which is part of UEM Group of Companies, is one of Malaysias largest healthcare support services company, providing housekeeping & engineering services to more than 400 government and private hospitals and healthcare institutions. Faber has just submitted to the government to extend the concession period. This ties in with the deal to mop up the balance 30% in FMS. The extension, when approved, will be a major catalyst.

The other timely deal was the disposal of Sheraton Hanoi to Berjaya Land which raised Faber's cash hoard to RM438m or a net cash balance of RM247m. FMS earned RM41m PBT in 2007. Net eps for 2008 should hit 20 sen, and looking at the current share price of 94 sen, its a steal literally.

Why no action? Well, nobody seems to be following the stock for now. UEM owns 38%, the rest are pretty well spread. Although I am not a fan of sum-of-the-parts as a catalyst, its worth noting that the share has a SOTP of at least RM2.70 per share. Once UEM gets around to it, its a very brilliant privatisation. Maybe its so small to UEM now. Still, a bargain is a bargain. One of the major concerns was as to whether Faber's HFM concessions in the opposition-controlled northern states will be reviewed. The recent submission for approval for extension should assuage investors' fears.

Faber also has HFM operations abroad with two of its joint ventures in India showing promise. Faber has a joint venture with the Apollo medical group in India, providing HFM and non-HFM services. Apollo, which is a renowned hospital operator in India, will inject its existing hospitality outsourcing business which has revenue of between RM10 million and RM15 million per annum, into the joint venture (JV) company. The JV also secured the contract for cleaning services at Hyderabad International Airport in Andhra Pradesh, but this venture is relatively small.

In Punjab, Faber has teamed up with Singa Real Estates Ltd, forming Faber Star Facilities Management Ltd, in which the Malaysian company has a 51% shareholding. This JV company has the mandate to manage services at three shopping malls in India.

The final potential catalyst is a possible merger between Faber Medi-Serve and Pantai Medivest, a subsidiary of healthcare group Pantai Holdings Bhd.

Khazanah Nasional has 20.8% in Singapore-listed Parkway Holdings Ltd which, in turn, controls Pantai Holdings Bhd. It certainly makes sense.

There is no target price, but buying below RM1.00 presents little risk. One should be able to reap at least 50% return when market perks back up to 1,400.

p/s photos: Tangmo Pattarathida

1 comment:

yj said...

pls take note that the govt consession will lapse in 2011 and there's no guarantee the contract will be renewed.