Naim to benefit from JV with Sinohydro

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KUCHING: Naim Holdings Bhd’s (Naim) joint-venture (JV) with the China-based Sinohydro Corporation (Sinohydro) has successfully been awarded a RM209 million job for the Bakun-Similajau transmission system.OSK Research Sdn Bhd (OSK Research) in its research report cited that the award was for Package B (Part 1 and 2) of the 275 kv Overhead Transmission Line was for Bakun-Similajau transmission system.

The RM209 million project was awarded by Sarawak Energy (NR) with Naim holding 40 per cent stake in the JV and Sinohydro holding the remaining 60 per cent. This great focus on infrastructure development in Sarawak augured well for “home-grown” contractors, said the research firm.

At the same time, the management divulged initial works on the awarded job had begun for completion within 24 months. As the job was secured via open tender basis, the margin guidance was at four per cent to five per cent at the profit before tax (PBT) level. The line will transmit electricity from the Bakun Dam to Similajau and formed part of the Bakun-Penisular transmission grid on the Sarawak side.

As the state elections were expected to be held by end-2010 or early 2011, there was a strong “political incentive” for jobs to roll out before the polls, the research house noted.

Nonetheless, under the Sarawak Corridor of Renewable Energy (SCORE), there were plans to develop Similajau into an industrial zone. Some of the proposed projects were an aluminium smelter, a deepwater port and a rail link to Tanjung Manis. Within Sarawak, some RM1.4 billion of road jobs had been identified.

Meanwhile, other potential jobs that may flow to Naim included a resettlement village worth at RM200 million, affordable housing at RM150 million and road works at RM120 million. Naim also had an offer to undertake a Fijian road rehabilitation job worth US$100 million.

OSK Research also highlighted that the job would be awarded in packages and the first portion was worth FJD21 million (RM37.3 million based on the implied RM/FJD cross exchange rate using USD)

Despite the share of RM83.6 million for the award, OSK Research stuck to its assumption of RM400 million order book for Naim and made no changes to the target price of RM4.12 based on the price earnings ratio multiplier from 11 times to 12 times.