Thursday, December 1, 2011

Faber dips in early trade after 3Q losses, MIDF downgrade

KUALA LUMPUR (Dec 1): FABER GROUP BHD [] shares fell on Thursday after it posted net losses of RM26.87 million in the third quarter ended Sept 30, 2011 compared with net profit of RM29.01 million a year ago.

At 9.20am, Faber fell two sen to RM1.48 with 94,700 shares traded.

Faber said on Nov 30 that the losses were mainly due to the recognition of costs amounting to RM44.5 million for works completed for the projects in the United Arab Emirates (UAE) where the corresponding revenue was not recognised as it could not be measured reliably.

MIDF Research downgraded Faber to Neutral from Buy'' and lowered its target price to RM1.52 from RM3 previously and said it was excluding the net cash portion of RM168 million in its valuation as the research house expects Faber to fork out more cash going forward given the fact that its total trade payables surged 75% quarter-on-quarter to RM526 million.

'As such, we are downgrading our recommendation on Faber to Neutral (from BUY). Our target price implies a PER12 of 8x, which is lower than its historical average since 2007 of 10x.

'We believe the discount is fair factoring in the potential of further impairment and likelihood of Faber losing its concession in Sabah (Faber could be relegated to be a sub-contractor where profit margin will be lower),' it said on Dec 1.

MIDF Research said Faber was going through a period of transition with respect to its domestic concession and its Middle East aspirations.

'We would be looking for more certainty before making any recommendation upgrade,' it said.

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