Faber ... Dec10

Warisan Harta Sabah Sdn Bhd, the wholly owned investment arm of the Sabah state government, has submitted a bid for hospital support services (HSS) in Sabah.

It has submitted a bid which is “competitive” and “at par” with Main Market-listed Faber Group Bhd’s bid for the concession.

With the strong backing of the state government, Warisan Harta hopes the federal government will give the proposal serious consideration,

Warisan Harta has the necessary experience and expertise to offer HSS in Sabah, given that it already has business ventures in the healthcare sector in the state.

Warisan Harta currently has related businesses in healthcare services, one of which is its associate-owned Tawau Medical Centre Sdn Bhd and two other medical centres in Sabah.

Warisan Harta currently had good indirect relations with Khazanah Nasional and is confident that the submission of bids for HSS which pits Warisan Harta against Faber (34.29% owned by Khazanah Nasional) will not in any way hinder its business cooperation of the new medical centre in Kota Kinabalu.

At the moment, the 15-year concession to maintain hospitals in Sabah and Sarawak and some parts of Peninsular Malaysia are held by Faber which is seeking to renew its contract with the Ministry of Health. If Faber secures the contract, it would give the company guaranteed recurring income and steady cash flow until 2026.

The company reported its nine-month net profit of RM75.87 million till Sept 30 — an impressive 89.15% increase from RM40.11 million while revenue rose to RM684.9 million from RM509.22 million.

Earnings per share for the nine months period was at 20.9 sen while net assets at RM1.22 per share.

Faber is set to lose a sizeable chunk of its future earnings stream if it does not clinch the HSS contract in Sabah and Sarawak.

Optimists however, say in view of its track record and expertise, denying Faber the renewal will run counter to the government's recent economic reforms.

Although the piece of news (another bidder) will continue to dampen sentiment in the Faber stock, the negative sentiment has been partly priced into the current share price (21 Dec 2010), as it had been on a downtrend since news first emerged in early October 2010.

The HSS concession under Faber expires in November in 2011.