KENANGA RESEARCH Results Note

26 August 2010

BUY
RM1.00
Fajarbaru Builder Group
Target Price: RM1.51 Another stunning year in FY10
Stock data l FY10 net profit of RM24.7m came inline with our expectations and
Market cap (RMm): 166.2 above consensus at 101% and 111%, respectively. The net profit
Issued shares (m): 166.2 jumped by 72% on the back of lower revenue by 10% mainly due to lower
52-week range: RM0.92-RM1. 24 operating cost with higher EBITDA recorded at 19% as compared to the
3-mth avg daily volume: 550,504 shrs previous year at 10%. The favourable results were also supported by
Bloomberg code: FBC MK higher margin from the ongoing projects coupled by lower building material
YTD price chg: -3.9% cost. It had also announced shares dividend of 1 treasury shares for every
YTD KLCI chg: +9.7% 20 existing shares.
Est. free float: 63.3%
Major shareholders: l YoY, net margin increased significantly on the back of bad debts
Big Victory Hldgs: 13.1% recovered and lower operating cost. The higher net profit was mainly
Modern Discovery: 9.0%
due to bad debts repayments and as well as favourable margins from the
Tan Sri Datuk Chai 7.4%
Kin Kong:
new projects ie: shrimp farm project in Terengganu, as its EBITDA surged
Dato’ Ir Low Keng Kok 7.2% from 19% to 24%. Nonetheless, the revenue was 10% lower due to less
KLCI FBM70 FBM100 Syariah Hijrah
progressive billings in the quarter as most of the key projects were
No No No Yes No completed in FY09.
Consensus l QoQ, revenue grew by 3% as slower recognition sales. The net profit
FYE 30 Jun 2011E 2012E jumped by 86% on the back of higher other income from debt repayments
Net profit (RMm): n.a. n.a. and 3% higher margin for the ongoing projects. The net margin is still at the
EPS (sen): n.a. n.a. favourable level at 13% which is improving since the 1Q10. We believe that
Forecast revision is due to prudent measurements taken by the management in securing
new projects without pressuring its profitability via low bid price.
FYE 30 Jun 2011E 2012E
Net profit (RMm): 24.2 - l One of the contenders for LRT extension project. Recall that Fajarbaru
Revised net profit (RMm): 28.9 30.9 is one of the prequalified contractors for main and sub LRT extension
Share price chart projects and segmental box girder for LRT extension project; we
understand that the project will be awarded in smaller packages which will
increase the likelihood of smaller contractors like Fajarbaru to win some of
the projects.

l Current order book stood at c RM300m for next 2 years. We expect

The Research Team Tel: 603-2713 2292
research@kenanga.com.my
Fajarbaru to secure at least another RM200m worth of project during CY11
as we see that the favourable construction sector in 2011 will likely to
benefit Fajarbaru.
l Maintain BUY with higher TP of RM1.51 from RM1.32. We revised our
FY11 earnings higher by 19% and introducing our FY12 earnings in our
forecast. Our TP is based on 10x PE to FY11 EPS of 15.1 sen.

Results Highlights
FYE: Jun (RMm) 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 QoQ % YoY % FY09 FY10 YoY %
Revenue 55.9 34.5 55.2 40.0 37.8 43.4 44.7 3% -19% 184.6 165.9 -10%
EBITDA 3.9 5.2 7.3 5.0 7.4 8.2 10.6 18.8 31.1
EBITDA margin (%) 7% 15% 13% 13% 19% 19% 24% 10% 19%
Depreciation (0.2) (0.1) (0.2) (0.1) (0.1) (0.0) (0.5) (0.6) (0.8)
Interest Expense (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) 0.0 (0.2) (0.0)
Interest Income 0.5 0.4 0.6 0.5 0.6 0.5 0.1 1.8 1.6
Other income 0.9 1.2 0.8 0.9 0.9 0.9 0.9 3.7 3.7
Pretax Profit 3.6 4.9 6.9 4.7 7.0 7.7 13.7 79% 99% 17.8 33.0 86%
Tax (0.4) (0.7) (1.6) (1.2) (1.8) (2.1) (3.3) (3.4) (8.4)
Minority interest (0.0) (0.0) (0.0) 0.0 0.0 (0.0) (0.1) (0.0) (0.1)
Net Profit 3.2 4.1 5.3 3.5 5.1 5.6 10.5 86% 96% 14.4 24.7 72%
EPS (sen) 2.6 3.1 3.6 2.5 3.3 3.6 6.8 9.3 16.0
PP7004/02/2011(029201)
 Results review
% of
QoQ (RMm) 3Q10 4Q10 chg Comments
Due to higher progress billing of new smaller
Revenue 43.4 44.7 3% scale projects

EBITDA 8.2 10.6 29% Favourable margin for ongoing projects

Net Profit 5.6 10.5 86% Supported by bad debts recovery of RM2.7m

% of
YoY (RMm) 4Q09 4Q10 chg Comments
Lower billings as most of the key projects
Revenue 55.2 44.7 -19% has been completed in FY09
Bad debts recovered and higher margin from
EBITDA 7.3 10.6 44% new projects

Net Profit 5.3 10.5 96% As per above

Earnings estimates
FYE: 30 Jun (RMm) 2007 2008 2009 2010 2011E 2012E
Turnover 123.2 87.6 184.6 166.0 239.7 291.7
Operating cost (109.5) (77.7) (160.7) (129.5) (191.8) (239.2)
Profit/(loss) from operation 13.7 9.9 23.9 36.5 47.9 52.5
Finance cost (0.2) (0.1) (0.2) (0.1) (0.4) (0.5)
Pre-tax profit 8.3 13.7 17.8 33.1 39.0 41.7
Tax (0.5) 1.0 (3.4) (8.6) (10.2) (10.8)
Net profit 7.7 14.7 14.4 24.5 28.9 30.9
EPS (sen) 4.0 7.6 7.5 12.8 15.1 16.1
P/BV 3.0 2.4 1.7 1.4 1.2 1.0
PE(x) 26.3 13.9 14.2 8.3 7.0 6.6
Operating margin (%) 11% 11% 13% 22% 20% 18%

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Fajarbaru Builder Group – 26 August 2010 Page 2 of 2