Favelle Favco's earnings prospects rise on oil and gas recovery

KUALA LUMPUR: MIDF Research has reiterated its positive view on Favelle Favco Bhd as its recent contract wins signal a recovery for the oil and gas sector.

Recently, Favelle Favco announced that its subsidiaries have secured eight purchase orders for offshore cranes, tower cranes, a compressor system, solar system and upgrading with a combined value of about RM121.1mil.

Following these wins, MIDF estimates that the group's orderbook has risen to about RM637mil.

The newly acquired contracts are expected to contribute positively to the earnings and net assets of FFB for the financial year ending Dec 31, 2021, and beyond.

According to the research house, Favelle Favco's clients will be prompted to restart offshore projects given the increase in Brent crude oil prices in 1HFY21 following the easing of the pandemic and growing demand, in addition to the recent Opec+ decision to increase oil supply to 400,000 barrels per day in the next few months.

In addition, the group has the ability to deploy its cash flow in various ways including investment in its rental fleet and new crane models as well as adding new external venture into its portfolio.

MIDF is confident that FFB will be able to sustain its operations and will definitely occupied with more orders well into FY22 as demand for oil recovers.

"We opine that demand for oil among consumers and industrials will gradually restore in the short term, hence increasing the need for offshore and shipyard cranes

to return to the market.

"Furthermore, FFB’s Exact Group currently holds over 20 live maintenance contracts with most oil majors in Malaysia, supplies hybrid solar and wind turbine for offshore facilities, and provides various automated analytical

and maintenance systems including pipeline monitoring and plant intelligence solutions," it said.

MIDF maintained its "buy" recommendation and an unchanged target price of RM3.
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MIDF Research , Favelle Favco , oil and gas


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