KENANGA RESEARCH Results Note

26 August 2010

BUY
RM3.26
Naim Holdings
Target Price: RM4.10 1H10 below expectations
Stock data l Naim’s 1HFY10 net profit of RM38.4m was below consensus estimate
Market cap (RMm): 815.0 of RM93.9m (41%) and ours of RM95m (40% ) as we believe
Issued shares (m): 250.0 construction division continue to suffer a start up cost in Fiji with
52-week range: RM2.40-RM3.70 total construction margin of only 7%.
3-mth avg daily volume: 90,906 shrs
Bloomberg code: NHB MK l Naim is recognising higher progressive billings on its construction book
YTD price chg: +10.9% after a slow 1Q due to festive quarter. The RM1. 1b unbilled order book
YTD KLCI chg: +9.7% should sustain the group over next 2 yrs.
Est. free float: 55.0% l Property division contributed higher sales of RM47m (vs 1Q of
Major shareholders:
RM33.2mn). Gross margin was higher due to higher commercial
Island Harvests S/B: 12.3%
Datuk Hasmi Hasnan: 11.7%
property sales and recognition of unbilled sales with EBIT margin of
Tapak Beringin S/B: 11.0% 36%. Unbilled sales of RM100m should underpin property earnings
Lembaga Tabung Haji: 10.0% going forward.
KLCI FBM70 FBM100 Syariah Hijrah l Positive outlook for Dayang. Its 36% owned Dayang Holding has a
No No No Yes No large orderbook of RM1.1b. In March 2010 Dayang announced that it
Consensus has been awarded RM400m contract by Shell, this has boosted
Dayang’s order book to RM1.1b which will last till 2015. Earning rerating
FYE 31 Dec 2010E 2011E
Net profit (RMm): 91.6 104.2
for Naim is expected given that Dayang has a current tender book of
EPS (sen): 37.0 42.2 RM540m and there is RM1.3b upcoming maintenance contracts
tenders from Petronas for the remaining part of 2010.
Forecast revision
l We revised down our PAT estimates marginally by 6.7% and 6.4% for
FYE 31 Dec 2010E 2011E
FY10 and FY11 as we lower our construction margin assumptions.
Previous net profit (RMm): 95.0 100.5
Revision (%): 6.7% 6.4% l Maintain BUY and our target price of RM4.10 applying a 11x FY11F
Revised net profit (RMm): 88.6 94.1 adjusted EPS of 37.6 sen and a 41% discount to the top three
Share price chart construction companies average of 16.9x. We expect Naim to pay
dividend of 15.0sen generating a yield of 4.0%. Naim is the prime
beneficiary of pump priming for SCORE including potential flood related
infrastructure investments and is in line to secure major projects while
FDI will eventually draw new population growth into Sarawak benefitting
its property development division.

The Research Team ?03 – 2713 2292

research@kenanga.com.my

Results Highlights
FYE: 31 Dec (RMm) 2QFY09 3QFY09 4QFY09 1QFY10 2QFY10 1HFY09 1HFY10 QoQ% YoY% FYYoY%
Reveneus 134.34 144.46 152.92 123.35 155.95 229.65 279.30 26% 16% 22%
Cost of sales (106.32) (107.20) (119.91) (99.98) (119.45) (178.01) (219.42) 19% 12% 23%
Gross profit 28.03 37.26 33.00 23.38 36.50 51.64 59.88 56% 30% 16%
Other income 4.06 0.89 1.82 1.65 0.94 4.67 2.60 -43% -77% -44%
Administration (6.85) (7.84) (9.25) (8.61) (9.56) (13.44) (18.17) 11% 40% 35%
Selling expenses (1.26) (0.93) (1.17) (0.89) (1.07) (2.36) (1.96) 21% -14% -17%
Other expenses (0.24) 0.16 0.38 (0.32) (0.13) (0.63) (0.45) -61% -46% -28%
Finance cost (0.39) (0.88) (1.03) (1.09) (2.00) (0.86) (3.09) 83% 413% 259%
Associates 5.93 4.13 1.00 4.78 5.23 10.02 10.01 9% -12% 0%
JV 0.94 0.70 0.20 0.32 0.38 2.74 0.70 19% -60% -74%
PBT 30.23 33.48 24.95 19.61 30.69 51.78 50.30 56% 2% -3%
Income tax (6.77) (12.12) (7.65) (5.13) (6.35) (11.54) (11.48) 24% -6% 0%
MI (0.80) 0.00 (1.69) (0.20) (0.42) (1.74) (0.62) 108% -48% -65%
PAT 22.65 21.40 18.81 13.99 24.36 38.50 38.36 74% 8% 0%
PP7004/02/2011(029201)
 Results Review
YoY (RMm) 1HFY10 1HFY09 Chg Comments
Revenue 279.3 229.7 +22.0% Due to the increase demand in commercial
and higher-end property market.
Pretax profit 38.4 38.5 0.0% Flat due to its start up cost in Fiji operation.

QoQ (RMm) 2QFY10 1QFY10 Chg Comments

Revenue 156.0 123.4 +26.0% Stronger progressive billings compare 1Q.
Pretax profit 24.4 19.2 +74.0% 1Q is a seasonably weak quarter.

Earnings Estimates
FYE 31 Dec (RMm) 2007 2008 2009 2010E 2011E
Revenues 646.0 523.4 527.0 617.4 682.7
Pretax profit 126.3 84.4 110.0 120.8 128.2
Net profit 76.5 62.5 78.7 88.6 94.1
Net profit growth 15% -18% 26% 13% 6%
EPS, sen 30.6 25.0 31.5 35.4 37.6
DPS, sen 11.0 10.9 13.0 13.0 13.0
NTA, RM 2.15 2.27 2.47 2.70 2.94
PER 14.49 5.52 10.48 9.03 8.50
P/NTA 2.06 0.61 1.33 1.19 1.09
ROE 14% 11% 13% 13% 13%
Div yield 2% 8% 4% 4% 4%

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Naim Holdings – 26 August 2010 Page 2 of 2