KUALA LUMPUR (Sept 24): Favelle Favco Bhd (FFB) is expected to be able to sustain its earnings for this year on the back of a steady order book momentum, said MIDF Research.

The tower and offshore crane manufacturer said yesterday it had bagged RM56.1 million in purchase orders for its cranes since Aug 27.

This brought its order book to RM569.1 million as of yesterday, said MIDF.

“We are making no changes to our FY20-21 earnings estimates (for the financial years ending Dec 31, 2020 and Dec 31, 2021 respectively) at this juncture as the purchase orders came in within our FY20-21 order book replenishment assumptions of RM350 million for FY20 and RM370 million for FY21,” said MIDF analyst Noor Athila Mohd Razali.

MIDF maintained its "buy" call for the stock with an unchanged target price (TP) of RM3. The stock, which fell to a low of RM1.73 on March 23, had risen some 34% to RM2.32, giving it a market capitalisation of RM519.55 million.

Noor Athila said MIDF expects lower revenue to be recognised by FFB for this year following the challenging operating environment brought upon by the oil price war earlier this year and the ongoing fight against Covid-19.

However, she believes that FFB will be able to sustain its earnings for this year, given that its operating and profit margins remained intact for the past two quarters despite the restrictions brought upon by the Covid-19 pandemic and enforcement of the movement control order (MCO).

“Furthermore, as evident in the purchase orders and in line with the gradual reopening of economies worldwide, we are seeing demand coming back for both offshore and infrastructure cranes as demand for crude and infrastructure returns to the market,” she added.