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KENANGA RESEARCH Quick Bites

01 August 2012

PP7004/02/2013(031762) KENANGA RESEARCH

Naim Holdings OUTPERFORM Price: RM1.77

Bags RM208m KVMRT package Target Price: RM2.94 News Naim announced that they had finally received the

letter of award (LOA) for Package S4 from MRT Co.for the construction of the elevated stations inSection 16, Pusat Damansara and Semantan for atotal contract sum of RM208m.

Comments We are neutral on the announcement as the contractaward of RM208m is within our FY12 annual orderbook replenishment of RM500m.

Based on managements guidance, the constructionof the three elevated stations will take up to 48months and it will be completed by 2016.

We expect the contract margin to hover around 6%to 8% at the pre-tax level, which is in line with thecompanys track record.

Outlook To date, Naims outstanding order book currentlystands at RM1.3b inclusive of the contract award,which would provide earnings visibility for the nextfour years.

The next rerating catalyst for Naim will be additionalnew contracts secured within the remaining months

of FY12. Thus far, Naim has managed to secureRM500m worth of new contracts in FY12.

Forecast No changes to our FY12E and FY13E earningsestimate.

This is because with the longer period ofconstruction, we expect the contribution of thiscontract could be minimal at 2% to FY12 earnings asbulk of the earnings is expected to be recognised inthe next few years.

Rating Maintain OUTPERFORM

We maintain our OUTPERFORM recommendation due

to the attractive upside (+66%) to our TP of RM2.94.

Valuation Maintain our Target Price of RM2.94 based on SOPvaluation.

Risks Delays in construction projects. Escalating building material prices.

Share Price Performance

1.50

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2.50

Jul1

1

Aug11

Sep11

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Jan12

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Mar

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Apr1

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Jun12

Jul1

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KLCI 1631.6

YTD KLCI chg 6.6%YTD stock price chg 7.9%

Stock Information

Bloomberg Ticker NHB MK EquityMarket Cap (RM m) 442.5Issued shares 250.0

52-week range (H) 2.39

52-week range (L) 1.54

3-mth avg daily vol: 203,449

Free Float 67%

Beta 1.3

Major Shareholders

ISLAND HARVESTS SDN 12.3%

TAPAK BERINGIN SDN B 11.0%LEMBAGA TABUNG HAJI 10.0%

Summary Earnings Table

FY Dec (RMm) 2011A 2012E 2013E

Turnover 409.6 495.9 689.2EBIT 21.7 61.4 94.3PBT 57.3 99.6 123.5Net Profit (NP) 48.4 73.7 91.4Core NP 48.4 73.7 91.4

Consensus (NP) 76.1 89.7Earnings Revision - - -EPS (sen) 19.3 29.5 36.5EPS growth (%) -50.6 52.4 24.0DPS (sen) 4.8 7.4 9.1

NTA/Share (RM) 3.1 3.5 3.4PER 9.1 6.0 4.8

Net Gearing (x) 0.2 0.0 0.0Dividend Yield (%) 2.7 4.2 5.2

The Research Teamresearch@kenanga.com.my

+603 2713 2292

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Naim Holdings 01 August 2012

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Income Statement Financial Data & Ratios

FY Dec (RMm) 2009A 2010A 2011A 2012E 2013E FY Dec (RM m) 2009A 2010A 2011A 2012E 2013ERevenue 566.9 612.7 409.6 495.9 689.2 GrowthOperating Profit 98.2 109.4 21.7 61.4 94.3 Turnover (%) 8.3 8.1 -33.1 21.1 39.0

Other Income 5.0 4.9 12.0 14.5 20.1Operating Profit(%) 65.8 11.4 -80.2 183.4 53.5

Interest Exp -2.8 -7.6 -14.0 -14.0 -14.0 PBT (%) 43.4 14.3 -56.6 73.6 24.0

Associate 19.5 26.5 33.0 46.4 37.0Core Net Profit(%) 40.9 15.1 -50.6 52.4 24.0

ExceptionalItems 0.0 0.0 0.0 0.0 0.0PBT 115.5 132.0 57.3 99.6 123.5 Profitability (%)

Taxation -30.5 -32.1 -9.0 -25.9 -32.1 Operating Margin 17.3 17.9 5.3 12.4 13.7

Minority Interest 0.0 2.1 0.0 0.0 0.0 PBT Margin 20.4 21.6 14.0 20.1 17.9Net Profit 85.0 97.8 48.4 73.7 91.4 Core Net Margin 15.0 16.0 11.8 14.9 13.3

Core Net Profit 85.0 97.8 48.4 73.7 91.4 Effective Tax Rate 26.4 24.3 15.7 26.0 26.0

ROA 8.0 9.3 3.7 5.3 6.1

ROE 13.0 13.5 6.5 9.2 10.5

Balance Sheet DuPont Analysis

FY Dec (RMm) 2009A 2010A 2011A 2012E 2013E Net Margin (%) 40.9 15.1 -50.6 52.4 24.0

Fixed Assets 108.2 123.7 118.4 121.7 127.8Assets Turnover(x) 0.5 0.6 0.3 0.4 0.5

IntangibleAssets 0.0 9.6 9.0 9.0 9.0

Leverage Factor(x) 1.6 1.5 1.7 1.7 1.7

Other FA 278.9 312.9 400.2 395.0 395.0 ROE (%) 13.0 13.5 6.5 9.2 10.5

Inventories 27.1 32.7 26.9 25.9 35.5

Receivables 292.6 308.1 280.0 277.8 386.0 LeverageOther CA 260.2 228.4 243.2 237.5 237.5 Debt/Asset (x) 0.1 0.1 0.3 0.3 0.2Cash 90.1 39.2 213.5 315.1 316.8 Debt/Equity (x) 0.2 0.2 0.5 0.4 0.4Total Assets 1057.2 1054.6 1291.1 1381.9 1507.7 Net Cash/(Debt) 0.4 0.7 0.4 0.1 0.1

Net Debt/Equity(x) 0.1 0.1 0.2 0.0 0.0

Payables 183.1 137.2 132.8 158.7 214.0ST Borrowings 130.9 104.4 7.9 7.9 7.9 ValuationsOther STLiability 7.1 4.4 1.3 7.8 9.6 EPS (sen) 34.0 39.1 19.3 29.5 36.5LT Borrowings 10.1 20.7 339.1 339.1 339.1 GDPS (sen) 8.0 10.0 4.8 7.4 9.1Other LTLiability 51.6 48.5 46.3 46.3 46.3 NTA (RM) 2.6 2.8 3.1 3.5 3.4Minorities Int. 22.0 15.4 16.2 19.5 19.5 PER (x) 5.2 4.5 9.1 6.0 4.8

Net Assets 652.4 724.0 747.5 802.7 871.3Gross Div. Yield(%) 4.5 5.6 2.7 4.2 5.2P/NTA (x) 0.7 0.6 0.6 0.5 0.5

Share Capital 250.0 250.0 250.0 250.0 250.0

Reserves 402.4 474.0 497.5 552.7 621.3Equity 652.4 724.0 747.5 802.7 871.3

Source: Kenanga Research

Fwd PER Band Fwd PBV Band

0

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9

Dec-05

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PRICE (RM) PER 3.1 x PER 7.0 x PER 10.9 x PER 14.9 x PER 18.8 x

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PRICE (RM) PBV 0.4 x PBV 0.9 x PBV 1.5 x PBV 2.0 x PBV 2.6 x

Source: Kenanga Research

Sum-of-parts valuation

No. Division Value (RMm) PE DCF (WACC) Per share (RM)1 Construction 363.2 10x 0 1.45

2 Property 117.9 0 11% 0.473 Oil & Gas-DEHB 387.6 12 0 1.55

3.47Net debts (133.5) -0.53

Fair value (RM) 2.94Source: Kenanga Research

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Page 3 of 3 KENANGA RESEARCH

Stock Ratings are defined as follows:

Stock Recommendations

OUTPERFORM : A particular stocks Expected Total Return is MORE than 10% (an approximation to the5-year annualised Total Return of FBMKLCI of 10.2%).

MARKET PERFORM : A particular stocks Expected Total Return is WITHIN the range of 3% to 10%.UNDERPERFORM : A particular stocks Expected Total Return is LESS than 3% (an approximation to the

12-month Fixed Deposit Rate of 3.15% as a proxy to Risk-Free Rate).

Sector Recommendations***

OVERWEIGHT : A particular stocks Expected Total Return is MORE than 10% (an approximation to the5-year annualised Total Return of FBMKLCI of 10.2%).

NEUTRAL : A particular stocks Expected Total Return is WITHIN the range of 3% to 10%.UNDERWEIGHT : A particular stocks Expected Total Return is LESS than 3% (an approximation to the

12-month Fixed Deposit Rate of 3.15% as a proxy to Risk-Free Rate).

***Sector recommendations are defined based on market capitalisation weighted average expectedtotal return for stocks under our coverage.

This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do notmake any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard tothe specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This

document is for the information of addressees only and is not to be taken in suBangsar South Citytitution for the exercise of judgement byaddressees. Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use ofthis document or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, theirdirectors, and/or employees may have positions in, and may effect transactions in securities mentioned herein from time to time in theopen market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies.

Published and printed by:

KENANGA INVESTMENT BANK BERHAD (15678-H)8th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia Chan Ken Yew

Telephone: (603) 2166 6822 Facsimile: (603) 2166 6823 WeBangsar South Cityite: www.kenangaresearch.com Associate Director