FajaBaru ... June 09

The open tender for the construction of the RM2 billion new permanent low-cost carrier terminal (LCCT) will be out in one to two weeks. MAHB had appointed the project management company and in terms of consultancy, it had pre-qualified 97 out of 132 candidate consultants for 38 packages under the entire LCCT development. In addition, the land survey involving 1,500 acres had also been completed, and the consultant should start work on the soil survey soon.

Fajabaru is a small construction company with big ambitions, especially so with the emergence of Datuk Low Keng Kok, a substantial shareholder and MD cum CEO of the company. Low was formerly the joint MD of Road Builder Holdings Bhd, which was a large and respectable construction company prior to its takeover by IJM Corp Bhd. He owns 6.4% of FajaBaru while the chairman Datuk Kuan Peng Ching and Big Victory Holdings own 10.2% and 15.5% respectively.

FajaBaru specialises in design and build, which enables it to achieve relatively high margins for its contracts. The company currently (march 2009) has three projects with a total contract value of RM619 million. The contracts comprise LCCT Phase 2, double track project and Tampin Hospital.

The proposed construction of the new LCCT terminal costing around RM2 billion could provide more job opportunities for FajaBaru since it was involved in Phase 1 and is currently undertaking the construction of Phase 2.

The double track contract is for the stretch between Seremban and Gemas. FajaBaru has also clinched a contract to build the Tampin Hospital in Johor.

As at end of 2008, FajaBaru was sitting on cash reserves of RM80 million, which is close to its market capitalization of Rm100 million. It intends to use the cash for possible M&A opportunities and as working capital should it succeed in clinching larger projects.

With the imminent announcement of the second stimulus package, FajaBaru, with a strong balance sheet and experienced management, is well placed to bid for new contracts.

The company enjoys relatively good margins due to its design and build concept, which allows it flexibility in cutting costs. Furthermore, a reduction in construction material costs after the downturn has also improved margins.

It should be noted that FY2008 profits were boosted by a one off recovery of bad debts amounting to RM6 million and a profit guarantee payment of RM2.8 million arising from vendors under a profit guarantee agreement. The company is expected to receive an installment of rm931545 per quarter until Aug 20, 2011.

Financial Results … For six months ended Dec 2008, it posted a net profit of RM6.7 million.