Naim bullish on new contracts

0

KUCHING: Naim Holdings Bhd (Naim) is in the process of identifying more value-accretive acquisitions in addition to aggressively bidding for more construction projects.According to AmResearch Sdn Bhd (AmResearch), Naim was turning more bullish on its order flows ahead of Sarawak’s state elections due by mid-2011. It added that Naim was targeting RM0.5 billion to RM1 billion worth of new contracts compared with RM509 million secured in the financial year 2009 (FY09).

Recently, the group together with China’s Sinohydro secured the Bakun – Similajau transmission system project (Package B) worth RM209 million with Sinohydro holding a 60 per cent stake in the joint venture (JV) and Naim holding the remaining 40 per cent, it highlighted.

The research firm noted Naim was working hard to secure the balance of works under the RM1.3 billion Kuching flood mitigation scheme having completed an initial contract worth RM150 million under Phase 1 (Package 1) of the project.

Naim was issued with the letter of intent (LoI) for the project back in 2007 and given its track record of converting all of its previous awards, the group was in a strong position to clinch the remaining portion of this massive project, it concluded.

In further developments, the research firm stated that Naim was looking to clinch an additional contract worth RM167 million for the resettlement of quarters at the Bengoh Dam as construction works on the dam should be completed by year-end and was also in advanced negotiations for two building contracts with state-backed authorities where a decision could be known by the end of the fourth quarter of 2010 (4Q10).

The company was also looking abroad as it was currently involved in two projects in Fiji, located 3, 100 km northeast of Sydney, Australia, it reported.

Besides, AmResearch noted Naim had signed a memorandum of understanding (MoU) with Libya’s General Board of Privatisation and Investment (GBPI) to conceptualise a mixed-development property project called Solar Oasis.

It suggested the indicative value of the project was US$3.5 billion translated as RM12.8 billion and would take four to five years to complete.

Naim’s outstanding construction order book stood at RM3.5 billion with reassurance on earnings quality as 85 per cent to 93 per cent of the group’s construction earnings were based on contracts already in hand, pointed out the research house.

It added the company recorded a near-two fold jump in FY09 construction profits at RM57 million propelling construction pre-tax margins to a record 18 per cent compared with seven per cent in the financial year 2008 (FY08).

The research firm noted Naim’s management guided that construction margins in FY09 were partly boosted by some one-off mark-ups and expected margins to normalise to 10 to 15 per cent going into the financial year 2010 forecast (FY10F).

Naim’s management revealed that property transaction volumes had also picked up in Sarawak in the second half of last year anchored by a general improvement in economic activities backed by new sales figures of RM17 million for the first two months of 2010 up 13 per cent from last year’s numbers, it highlighted.

Thus, the research house suggested Naim would be accelerating pre-sales to cater for increasing demand targeting RM210 million for FY10F against RM122 million achieved in FY09.

Naim was also planning to launch some commercial developments in a 35-acre piece of land within the old Bintulu Airport but the project was still pending approval from the local authorities in Bintulu, it said.

The project would have an estimated gross development value (GDV) of RM900 million to RM1 billion and would consist of office, commercial lots and a hotel although the overall development plan was still at an infancy stage, the research firm reported.

It added the company had a growing foothold into the oil and gas (O&G) market in Malaysia via its 35 per cent-owned associate Dayang Enterprise Holdings Bhd (Dayang).

More importantly, the increasing trend towards deepwater and ultra-deepwater activities would likely trigger more demand for O&G support services providers such as Dayang and as such Naim’s share of Dayang earnings were projected to expand to RM17 million to RM24 million for the financial year 2010 to 2012 forecast (FY10F-12F) against RM15 million in the financial year 2008 (FY08), the research firm mentioned.

It suggested Dayang’s outstanding order book currently stood at RM700 million including two jobs one of them being a time charter of its workboat Dayang Zamrud for well reservoir management to Brunei Shell Petroleum worth RM70 million over three years.

The second job involved hook-up and commissioning activities for Petronas Carigali Facilities Sdn Bhd worth RM9 million, AmResearch stated.

Furthermore, it said Dayang was actively bidding for more than RM2 billion worth of contracts at this juncture.