Fajarbaru’s contract win paves way for a busy 2012 ahead

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TEMPORARY DELAY: Most of the contractors for the light rail transit (LRT) extension project has experienced delays, including Fajarbaru, as construction is expected to pick up pace only in early 2012.

KUCHING: Fajarbaru Builder Group Bhd (Fajarbaru) recently announced that it has secured a contract from the Ministry of Energy for the construction of a sewage treatment project worth RM62 million.

“The contract came in as a surprise to us as we are not expected any new contracts to be secured in financial year 2012,” according to a research report by Kenanga Investment Bank Bhd (Kenanga Research).

The research house noted that the sewage treatment project was located in the southern part of Klang and the construction was slated for 30 months starting from early 2012.

Fajarbaru’s order book was revealed to stand at about RM360 million, which was to be recognised until financial year 2014.

Kenanga Research highlighted that most of the contractors for the light rail transit (LRT) extension project had experienced delays, including Fajarbaru, as construction was expected to pick up pace only in early 2012.

“We expected the LRT extension project to contribute positively to Fajarbaru’s financial year 2012 earnings,” the report added.

Moving forward, Fajarbaru was marked as a strong contender among the small to mid-cap contractors to bid for government related contracts due to its strong track record and financial position.

The company was expected to be one of the beneficiaries for the Economic Transformation Programme (ETP) project rollouts and mass rapid transit (MRT) contracts, making the coming year a busy period for the construction sector. This was said to bode well for Fajarbaru which aimed to replenish its order book.

RHB Research Institute Sdn Bhd (RHB Research) on the other hand was less enthusiastic on the sector, believing that companies’ share price performance was likely to be muted over the next three to six months.

The research house’s belief was backed by, ‘a lack of investor confidence in the Klang Valley MRT project due to further delays in the roll-out of some large scale projects as well as the lack of credible new large-scale projects in the pipeline’.

Kenanga Research thus pegged a higher target price of RM1.20 per share for Fajarbaru as it tweaked its expected financial year 2012 earnings higher by six per cent to RM23 million, factoring in the contribution of newly secured contracts.