Company Background. Fajarbaru Builder Group (Fajarbaru) is a CIDB-recognised Class G7 turnkey contractor with principal activities in civil and infrastructural works as well as building construction. It comprises 4 core business divisions: (i) construction, (ii) property development, (iii) logging & timber trading, and (iv) plantations. Over the years, the group has successfully completed various construction and infrastructural projects, such as high-rise buildings, hospitals, railways, roads, bridges and airports. Currently, Fajarbaru primarily operates its business activities in Malaysia and Australia.

Prospects. (i) Aims to secure new contracts to replenish its RM1.1bil order book as of 31 Mar 2024. The group is actively tendering for projects in both private & government sectors, amounting to RM4.8bil, (ii) Expanding affordable housing in Malaysia, the group has projects in Kelantan (a 146-acre township) and Putrajaya (Residensi Cemara) with estimated GDVs of RM70mil and RM192mil respectively, (iii) Increasing presence in Australia with its latest acquisition of land in Fitzroy, Melbourne, to build apartments with an estimated GDV of RM175mil, scheduled to launch in 2025, and (iv) Seeking new opportunities & strategic acquisitions in its plantation division, the group engages in diverse activities on 600 acres in Pahang, including reforestation, fruit cultivation and durian farming.

Financial Performance. In 9MFY24, Fajarbaru posted a higher revenue of RM342.4mil (+2.3x YoY) with PAT of RM51mil (+14.2x YoY). This improvement was primarily attributed to higher progress of work from the property development division, with newly awarded projects progressively contributing to the construction division's growth.

Valuation. Fajarbaru is currently trading at an attractive 12.5x trailing P/E, which is lower than Bursa Construction Index’s 5-year forward average of 17.4x. As a comparison, GDB Holdings, which engages in construction and property development such as residential, commercial, infrastructure and mixed development, trades at much higher trailing P/E of 31.5x.

Technical Analysis. Fajarbaru surged to a new multi-year high with a long positive candle yesterday, which likely indicates the return of buying momentum. Given that the stock has also broken out from a 1-week bullish pennant pattern, we expect further upside from here. A bullish bias may emerge above the RM0.45 level with stop-loss set at RM0.40, below the 20-day EMA. Towards the upside, near-term resistance level is seen at RM0.60, followed by RM0.65.

Source: AmInvest Research - 5 Jun 2024