Sarawak theme continues to drive Naim Holdings higher

Naim Holdings Bhd hit a 52-week high of RM1.67 on July 23 but fell sharply to RM1.27 on Aug 5. Still, the drop was not as low of 69 sen, seen in December last year. The company is currently trading at a PE ratio of 7.5x and P/NAV ratio of 0.4x, which are lower than most peers.

Investors are eyeing Naim as a good counter to hold considering its exposure to the catalytic projects in Sarawak. Naim’s associate company, Dayang Enterprise Holdings Bhd has been rising to multiple years high as well.

Recently, the property developer said it is disposing of a parcel of land in Samarahan, Sarawak to Onlyee Flora Sdn Bhd for RM223.38 million. The 180.8-hectare mixed-zone vacant land is owned by Naim’s wholly-owned subsidiary, Naim Land Sdn Bhd.

The transaction price represents a 4% premium over the current market value of RM215 million, as appraised by independent valuer VPC Alliance (Sarawak) Sdn Bhd.

Naim said the disposal is part of its commitment to ensure long-term sustainability in its business operations in a tight property market dominated by substantial unsold properties.

The company explained that the disposal would provide an opportunity to realise gains and unlock the value of its investment at fair and reasonable market value.

Proceeds from the sale will be used to partially repay existing bank borrowings (about RM67.5 million) while RM155.88 million will be allocated for working capital purposes.

As it is, Naim stands out as the main beneficiary for flood mitigation jobs in Sarawak as it was involved in Phase 1 of the Kuching flood mitigation project.

Financially, Naim looks to be on a stronger footing with its net profit fot the second quarter ended June 30, 2024 surging to RM46.3 million from RM12.6 million a year ago.

This was despite posting a lower revenue to RM36.2 million from RM86.9 million a year earlier, dragged mainly by lower work progress achieved at project sites.

The higher net profit during the quarter, mainly due to some cost savings arising from the amicable settlement of a litigation with a contractor.

Naim also enjoyed better profit contribution from Dayang, giving it a higher share of net profit of RM7 million in the immediate preceding quarter to RM33 million during the current quarter.

The company was profitable in four of the past five financial years. Net profit decreased from the peak of RM56.6mil in FY19 to a low of RM78.7 million in FY21, but had recovered since. Net profit in FY23 was RM35 million.

Essentially, investors should keep a close tab on Naim, which benefits from better contribution from Dayang as well as its exposure on the booming property and construction sector in East Malaysia.