Favelle Favco’s earnings prospects positive


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

KUALA LUMPUR: The outlook for Favelle Favco Bhd appears positive, as its recent contract wins signal a recovery for the oil and gas sector.

The company recently 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 Research 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 Favelle Favco for the financial year ending Dec 31, 2021 (FY21) 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 the first half of FY21, following the easing of the pandemic and growing demand, in addition to the recent Opec+ decision to increase oil supply by 400,000 barrels per day in the next few months.

It noted the group also 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 Research is confident that Favelle Favco will be able to sustain its operations, and will be 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, Favelle Favco’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 Research maintained its “buy” recommendation on Favelle Favco, with an unchanged target price of RM3.

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