Favelle Favco gets more contracts

PETALING JAYA: Favelle Favco Bhd continues to see contracts coming its way and this is expected to boost earnings for the crane manufacturer.

On Tuesday, the group said that four of its subsidiaries have secured purchase orders with a combined value of about RM37.1mil, bringing its order book at about RM621mil.

The expected date of delivery for these jobs range from the first quarter to the fourth quarter of financial year (FY) 2022.

MIDF Research said the latest jobs win suggests growing momentum in the group’s financial performance.

“These new contracts are expected to contribute positively to the group’s earnings for the FY ending Dec 31, 2021 and beyond,” the research firm said in a report yesterday.

According to MIDF Research, the impact of the Covid-19 pandemic resurgence in the first half of FY21 had been detrimental for oil and gas service companies as projects were delayed and higher operating costs were reported due to border restrictions.

“Consequently, earnings for many companies had barely reached our expectations and Favelle Favco was no exception.

“Nevertheless, in the first half of FY21, Favelle Favco had reported a significant increase in earnings and revenue, rising 30% and 14% year-on-year, respectively,” noted the research firm.

Additionally, MIDF Research said the stock will be a beneficiary of the current crude oil rally with the expectation of more offshore exploration and drilling operations.

“The strong demand for crude oil amid the tightening global supply will call for more offshore exploration and drilling operations, hence increasing demand for offshore and shipyard cranes to be utilised,” it added.

However, resurgence of Covid-19 and oil price volatility remain risk factors.

MIDF Research maintains its earnings forecast for the group for FY21-FY23 as the latest contract wins fell within its expectation.

It keeps its “buy” call on the stock with a target price of RM2.72.

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