Favelle Favco – Revisit the Relative Valuation (Jan 2017)

We re-assessed the relative valuation of Favco after the share price surged by circa 10% recently to examine whether the current valuation is still reasonable (or attractive). We looked at four investment metrics and gathered the data through reliable sources (namely, Investopedia and Morningstar).

Our equity research points out that Favco is one of best performers in the cranes industry (in terms of profit and cash flow margins). Its relative valuation metrics are also the lowest among the peers (against the global players) which provides some level of comfort. As usual, we have adjusted the peer average to eliminate any outliers. For P/E, we have used 7.00x instead of 9.45x as we believe 9.45x is the high end which may not be achievable in the foreseeable future (our data shows that +1 standard deviation for P/E is 7.00x). All the calculations are based on the information obtained (as declared) which we have not independently assessed the accuracy. We believe the share price is fairly valued at RM 2.84 which implies an upside potential of 8.3%.

As discussed in previous research, the current landscape of O&G industry is improving on the back of favourable oil price recovery and possible expansion into regional infrastructure demand led by AIIB. We raised the target price from RM 2.75 to RM 2.84, downgraded the rating from BUY to NEUTRAL. Implied upside potential of 8.3%. Please be aware the limitations of our method as it does not consider the future earnings and potential increase in the order book.

 

Disclaimer: The views above are opinions based on facts and subjective judgements. Every care has been taken to ensure the accuracy of the information; we do not hold ourselves responsible for the completeness and accuracy. Yield Mountain (including the contributors) does not take any responsibility (be it monetary or non-monetary) for any actions rely on the information discussed.

Source for Favelle Favco
Source for Tadano Ltd
Source for Konecranes
Source for Palfinger
Source for Manitowoc

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