Favelle Favco expected to rely on overseas crane sales

This article first appeared in The Edge Financial Daily, on November 28, 2019.
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Favelle Favco Bhd
(Nov 27, RM2.80)
Maintain buy with a higher target price of RM3.22:
Favelle Favco Bhd’s (Favco) third quarter of financial year 2019 (3QFY19) reported net profit came in at RM23.6 million. However, its normalised earnings after excluding losses from foreign exchange and derivatives of about RM4.54 million came in at RM28.1 million. This brings its nine months of FY19 (9MFY19) earnings to RM63.7 million which are within our full-year earnings estimates at 79.8%. Comparing against 3QFY18, revenue and earnings dipped by 31.7% and 11.3% year-on-year respectively while on a quarterly sequential basis, revenue declined by 43.6% while earnings increased by 34.2% respectively. The decline in revenue was mainly due to lower sales recognised during the quarter.

Favco’s year-to-date revenue remains heavily reliant on its overseas crane sales which makes up almost 60% of its total revenue at RM266.9 million. That said, the increasing contribution from Intelligent Automation which contributed RM83.8 million is expected to balance it out. — MIDF Research, Nov 27