Wednesday, June 19, 2013

Favelle Favco

It is a 62% owned subsidiary of Muhibbah Eng, with its core business in manufacturing customised cranes for the offshore oil and gas, construction and ports/wharf industries.

Its order book stood at rm634 million as at Feb 2013 of which 83% was from overseas customers. Some 88% of the cranes in its order book are O&G cranes while the remaining 12% are destined for towers and shipyards.

When FFB started gaining momentum in securing orders back in 2007, investors conferring a higher valuation on the stock at 20x forward earnings.

FFB had been trading at a lower-than-expected valuation since 2008 due to the low margins it used to fetch from 2007 to 2008. Although margins improved from 2009 to 2012, its valuations continued to remain depressed.

This is attributed to the global financial crisis in 2009, which resulted in the company recording its lowest revenue in 2007, and the crisis facing its parent company, Muhibbah Engineering in relation to Asia Petroleum Hub (APH), which has dampened investor sentiment in the stock.

As the company's orderbook is at a five-year historical high (as at April 2013), this would provide a rerating catalyst for the stock.

Efforts have been made for APH's redevelopment and recovery post-General Election 2013.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.