KUALA LUMPUR: Investors chased shares of Faber Group Bhd yesterday, helping the stock close at its highest in over nine years, in anticipation the hospital support services (HSS) provider’s concession with the government will be extended.
The stock had earlier traded at an intraday low of RM1.83 before closing at its intraday high of RM1.87, up four sen, valuing the company at RM678.81 million. The stock has gained 34% this year, significantly outperforming the FBM KLCI’s 3% decline.
In a statement to Bursa Malaysia yesterday, Faber said it would continue to offer support services to government hospitals under a six-month interim extension. This follows the expiry of the company’s 15-year concession today.
Faber said its wholly-owned subsidiary Faber Medi-Serve Sdn Bhd had received a letter from the public private partnership unit of the prime minister’s department on the extension. Faber’s contract covers 79 hospitals in Perlis, Kedah, Penang and Perak, besides Sabah and Sarawak.
According to the company, the six-month extension is subject to prevailing terms and conditions commencing today or until the signing of a new concession agreement for the privatisation of HSS with the health ministry, whichever is earlier.
“The six months’ interim extension is not to be considered as binding on the government of Malaysia. A further announcement will be made concerning the privatisation of HSS on conclusion of negotiations,” Faber said.
Faber is one of the three government HSS concessionaires in the country. The other two are Pantai Medivest Sdn Bhd which covers 22 hospitals in the southern region of Peninsular Malaysia, and Radicare which serves 44 entities in the central and east coast region of the peninsula.
According to analysts, all three concession holders have been asked to submit their request for proposal (RFP) to the health ministry and Economic Planning Unit for the renewal of their concessions. The deadline was Oct 3 this year.
Although analysts are confident that Faber will retain its concession in Peninsular Malaysia by virtue of the company’s 15-year track record, they are also mindful of speculation that the concession for Sabah and Sarawak may go to local companies there.
Even if the contract in Sabah and Sarawak goes to other HSS players, analysts said there is a chance that Faber will still be a sub-contractor to undertake the concession. This is in anticipation that the new players may not have the necessary expertise and experience to undertake the project.
“As such, east Malaysia would still contribute to Faber’s earnings although the margins may be lower. However, with Faber being asked to submit its RFP based on its current geographical coverage comprising the northern region of Peninsular Malaysia and east Malaysia, we believe this indicates a high possibility of Faber being able to maintain its existing geographical coverage,” OSK Research Sdn Bhd wrote in a note dated Oct 6.
RHB Research said should Faber enter into a joint venture (JV) with new parties in Sabah and Sarawak, the group is likely to seek a controlling stake in the JV.
“Moreover, we recall previous discussions with management about the risk — Faber Medi-Serve’s service infrastructure is already established in Sabah and Sarawak, and therefore the company would likely stand a good chance of remaining a subcontractor to each JV,” RHB wrote in note dated Oct 5.
This article appeared in The Edge Financial Daily, October 28, 2011.
The stock had earlier traded at an intraday low of RM1.83 before closing at its intraday high of RM1.87, up four sen, valuing the company at RM678.81 million. The stock has gained 34% this year, significantly outperforming the FBM KLCI’s 3% decline.
In a statement to Bursa Malaysia yesterday, Faber said it would continue to offer support services to government hospitals under a six-month interim extension. This follows the expiry of the company’s 15-year concession today.
Faber said its wholly-owned subsidiary Faber Medi-Serve Sdn Bhd had received a letter from the public private partnership unit of the prime minister’s department on the extension. Faber’s contract covers 79 hospitals in Perlis, Kedah, Penang and Perak, besides Sabah and Sarawak.
According to the company, the six-month extension is subject to prevailing terms and conditions commencing today or until the signing of a new concession agreement for the privatisation of HSS with the health ministry, whichever is earlier.
“The six months’ interim extension is not to be considered as binding on the government of Malaysia. A further announcement will be made concerning the privatisation of HSS on conclusion of negotiations,” Faber said.
Faber is one of the three government HSS concessionaires in the country. The other two are Pantai Medivest Sdn Bhd which covers 22 hospitals in the southern region of Peninsular Malaysia, and Radicare which serves 44 entities in the central and east coast region of the peninsula.
According to analysts, all three concession holders have been asked to submit their request for proposal (RFP) to the health ministry and Economic Planning Unit for the renewal of their concessions. The deadline was Oct 3 this year.
Although analysts are confident that Faber will retain its concession in Peninsular Malaysia by virtue of the company’s 15-year track record, they are also mindful of speculation that the concession for Sabah and Sarawak may go to local companies there.
Even if the contract in Sabah and Sarawak goes to other HSS players, analysts said there is a chance that Faber will still be a sub-contractor to undertake the concession. This is in anticipation that the new players may not have the necessary expertise and experience to undertake the project.
“As such, east Malaysia would still contribute to Faber’s earnings although the margins may be lower. However, with Faber being asked to submit its RFP based on its current geographical coverage comprising the northern region of Peninsular Malaysia and east Malaysia, we believe this indicates a high possibility of Faber being able to maintain its existing geographical coverage,” OSK Research Sdn Bhd wrote in a note dated Oct 6.
RHB Research said should Faber enter into a joint venture (JV) with new parties in Sabah and Sarawak, the group is likely to seek a controlling stake in the JV.
“Moreover, we recall previous discussions with management about the risk — Faber Medi-Serve’s service infrastructure is already established in Sabah and Sarawak, and therefore the company would likely stand a good chance of remaining a subcontractor to each JV,” RHB wrote in note dated Oct 5.
This article appeared in The Edge Financial Daily, October 28, 2011.
