Monday, November 9, 2009

Faber Group -- Past Sin Redeemed? -- Part 1

This is the second time(the first time was MUI) I write about a company restructuring itself after fallen very badly. You can almost make a TVB soap opera out of this company. The original root of the company was Merlin Hotels Malaysia Berhad, listed in KLSE under Hotel category in 1964, so it's a 45 year old company we're talking about today. The company merged with Faber Union Sdn Bhd in 1972, a property development company changed their name to Faber Merlin Malaysia Berhad. Subsequently they changed their name to Faber Group.

The company tied up with Starwood International to rebrand its hotel to the Sheraton in 1993. In 1996, they were awarded a 15-year concession Health care Support Services to 72 government hospitals. While flying high, they incurred large debt and humbled by 1997/98 crisis. They were crippled and classified as PN4 in 2003 as theirs debts were worsening, incurred almost $ 2.2 to generate every $ 1.0 revenue. PN4 is much more worse than PN17, so why I want to talk about a company like that, esspecially with this kind of track record?


YTD Q3 2009/11.1

Holy sh** you must scream, I suppose, when you look at their huge losses from 1997 - 2004, and must be skeptical when they make 5 year profit continuously in the recent years. Not convinced? Your friendly neighbourhood Public Mutual took almost 4% or 16 million shares position.

Public Small Cap Fund 6.3 million shares
Public Far-East Property & Resorts Fund 5.2 million shares
Public Balanced Fund 2.3 million shares
Public Islamic Sector Fund 2.1 million shares

How now ? RHB rated the stock as outperformed with a price target of $ 2.49. OSK has a target of 1.54(revised up from 1.24).

Every sinner has a future, they truly repented I think. Should be forgiven. Check this out:

Year/ current ratio x:

2004 / 1.9
2005 / 2.0
2006 / 2.0
2007 / 2.5
2008 / 3.1

They are a bit overdrive and so Kia-Si, current ratio 2.0 is quite strong already but going up to 3.1x? Gearing from all times high that was unheard of 32 times in 2002 down to 0.60 times in 2008. They are in net cash position actually recently.

Market capitalization : 363 mln shares x 1.29 = 468 mln. Can market cap grow to about 550-850 mln? What are the drivers?

Disclosure: Long position.

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