Naim to benefit from more contract rollouts

KUCHING: Naim Holdings Bhd (Naim) is anticipated to win more contracts this year as more project rollouts are expected under the Budget 2010, 10th Malaysia Plan and the longer-term Sarawak Corridor of Renewable Energy (SCORE).RAM Rating Services Bhd (RAM Ratings) reflected this trajectory for the homebased property development and construction group, based on its strong track record in securing numerous government-funded construction projects in the state.

“These initiatives , coupled with Naim’s healthy outstanding order book of RM1.17 billion as at end of last March, are expected to sustain the group’s earnings over the next few years,” said RAM Ratings’ head of real estate and construction ratings, Shahina Azura Halip in a recent statement.

The rat ings agency recently reaffirmed its respective long and short term ratings of AA3 and P1 for Naim’s RM500-million Islamic Medium-Term Notes Programme (2010/2025) and RM100-million Islamic Commercial Papers Programme (2010/2017), pegging the long-term rating as having a stable outlook.

However , Shahina believed its margins would further narrow amidst more competitive contract bidding. The group’s unbilled sales dwindled from RM175 million as at end of August 2008 to RM79 million as at end of last March, due to fewer launches amid the subdued property market last year.

“Nonetheless, the group’s low holding costs vis-à-vis (in relations to) over 2,400 acres of undeveloped land, allow it the flexibility to defer launches according to market conditions.

On the other hand, Shahina felt that Naim’s strengths would be moderated by a number of uncertainties, notably its maiden foreign venture in Fiji.

To note, the group had commenced a US$40 million road rehabilitation works in Fiji, its collaborative project with the Fijian government and funded by the Export- Import Bank of Malaysia. It expected the project to be completed within the next two years.

“Since most of Naim’s operations are based in Sarawak, this exposes it to geographical-concentration risk in terms of unfamiliar operating and regulatory environments . Asits property projects are mainly limited to Miri, any upside potential for its property division will be capped by the performance of Sarawak’s property market.

“Additionally, Naim is also susceptible to the risks associated wi th the inherently cyclical construction and property sectors , including fluctuations in raw-material pr ices , the count ry’s economic performance and keen competition,” she outlined.

Separately, in view of reports stating the possibility of Naim to raise its stake in associate Dayang Enterprise Holdings Bhd (Dayang Enterprise), HwangDBS Vickers Research Sdn Bhd regarded the statement as ‘general’.

At present, Naim holds 36 per cent shareholding in the Miri-based offshore oil and gas services company.

“Without triggering an MGO (majority general offer), Naim is allowed to add two per cent every six month, which is very minimal.

“So, there’s nothing concrete right now, if you’re talking about Naim planning big numbers as regards to increasing its stakes in Dayang,” noted HwangDBS’ analyst Lee Wee Kiat when contacted yesterday.

Nevertheless, he shared an optimistic take on both companies’ prospects.

“Even with a four per cent addition every year, it still provides share price support on Dayang (Enterprise).

“By performance itself, Dayang has secured close to RM550.9 million worth of jobs and is now tendering for Petronas’ RM1.2 billion maintenance jobs. Its current order book of RM1.1 billion provides clear earnings visibility well into 2015. As an associate of Naim; what’s good for Dayang is definitely good for Naim,” Lee concluded.