FABER : maintain BUY at unchanged TP of RM4.00

OSK maintains 'buy' call on Faber

The renewal of Faber Group Bhd's Hospital Support Services (HSS) concession for East Malaysia should be based on track record and performance, if the government is truly committed to its transformation plan, says OSK Research.

The research house believes, it is always possible for the government to compensate Faber Group Bhd with a concession in West Malaysia that has wider geographical coverage, in the event it loses that for East Malaysia.

At the end of the day, if the concession is awarded to other parties, they would still have to engage Faber as the sub-contractor to undertake the concession, as the former may not have the expertise and experience to carry out the job, said the research house.

"We are not entirely concerned about the expiry of the original deadline for renewal of Faber’s HSS concession," said OSK in its research note today.

It pointed out that Pharmaniga experienced the same thing with regard to the renewal of its pharmaceutical supply concession, which was eventually renewed.

Meanwhile, it has maintained a "buy" on Faber Group Bhd at an unchanged target price of RM4.00, despite the uncertainty over the concession renewal.

Early last month, it was reported that the government might not renew Faber’s HSS concession for East Malaysia amid speculation, it might be awarded to local parties from Sabah and Sarawak instead.

Faber is expected to release its third quarter financial year ended 2010 results in the middle of this month,tentatively on Nov 16.

OSK said Faber is expected to record strong year-on-year growth in revenue and earnings,supported by the lower base impact in the corresponding quarter last year, as it only started recognising contributions from its major IFM contracts in Abu Dhabi in the fourth quarter 2009.

Despite the summer season and Ramadan month, Faber expects the contribution from Abu Dhabi to remain strong in the third quarter 2010. The company had ramped up its activities prior to the Ramadan month.

At 12.30pm, Faber was up eight sen to RM2.95.- Bernama