NAIM : Maintain BUY at RM3.45 with FV of RM5.09

Naim gets additional jobs at Bengoh dam

Naim Holdings Bhd
(Oct 28, RM3.52)
Maintain buy at RM3.45 with fair value of RM5.09: Naim Holdings Bhd announced on Bursa Malaysia yesterday that the group has been awarded an infrastructure contract at Bengoh Dam in Kuching, Sarawak, by the Kuching Public Works Department.

The contract is worth about RM168 million, involving the designing and building of a resettlement scheme in view of the near completion of the dam.

Naim is currently the main contractor for the Bengoh Dam, which has an estimated capacity of 144 million cu m. Work started in August 2007, and is scheduled to be completed by the end of this year.

More importantly, the latest announcement indicates Naim’s increasing job visibility amid a re-acceleration of news flow in Sarawak. This comes on the heels of the RM2.4 billion Sabah Oil & Gas Terminal (SOGT) project that the group secured in a 30:70 partnership with South Korea’s Samsung early last month. We make no changes to our earnings assumptions — as this new win forms part of our RM1 billion new order book assumption for FY10F.

We continue to like Naim as an excellent proxy to the Sarawak Corridor of Renewable Energy — where contract flows are intensifying ahead of the impending state elections (due by July 2011).

We draw comfort from five new hydro dams (capacity: 5,000MW) worth RM20 billion, that form part of the 131 Entry Point Projects (EPPs) under the federal government’s Economic Transformation Programme.

Given its entrenched position as one of Sarawak’s leading contractors, we believe Naim should be in a strong position to bid for supporting infrastructure works — including access roads leading to the proposed dams. This is on top of additional work packages that the group is trying to crystallise under the Kuching Flood Mitigation Scheme (balance: circa RM1.1 billion).

Maintain “buy” on Naim with an unchanged fair value of RM5.09 per share — based on a 20% discount to its net asset value. The stock trades at alluring FY10F/12F PERs of only six to nine times against a robust EPS CAGR of 20% and FY10F net gearing ratio of only 5%. — AmResearch, Oct 28