16.08.2006

Favelle Favco floats

Favelle Favco Bhd, the Malaysian based crane manufacturer was officially listed on the Malaysian stock exchanges secondary market yesterday. The company has until now been a wholly owned subsidiary of Muhibbah Engineering Bhd, which retains a majority stake in the business.

Favelle says that it plans to focus on expanding its presence in China, Russia and the Middle East this year. The company says that the Russian market currently only contributes around five percent of group revenues at the moment.
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Mohamed Taib Ibrahim (L) chairman of Muhibbah Engineering and Tan Sri A. Razak Ramli vice-chairman of Favelle, looking at the opening price

“We plan to introduce our tower crane business into Russia this year to boost the sales to 10 percent by 2007,” said deputy managing director and chief executive officer Mac Chung Hui, after witnessing Favelle's listing on Bursa Malaysia second board yesterday.

“In China, we believe the tower crane segment is the potential growth segment. The key strategy is to manufacture cranes there,” he added.

China also contributed about five percent to group turnover last year, he said, suggesting that the company might open a sales office there.

Favelle also said that it plans to move into the Brazilian market.

Favelle shares opened at 75 sen (£11p/$0.20) a 25 sen premium over its 50 sen (£.07p/$0.13) offer price. The counter was traded at a high of 78 sen and a low of 68 sen, before closing at 69 sen (£.10p/$0.19) with a volume of 9.3 million shares.

Vertikal Comment

When Muhibbah first looked at floating Favelle Favco its success was far from certain. The company has though posted strong earnings growth in the lead up to flotation and as yesterdays performance shows the stock got off to a good start, with good local reviews.

However a good deal of the earnings growth has come from a streamlining of its operations which has caused internal stress and strains in some parts of its empire The company’s challenge now is to win a larger market share for its products while maintaining the strong profits growth that the stock market is anticipating.

High energy prices and growth in parts of the developing world will definitely help. The company has a current order book stands of RM314.5million (£45/$85 million) with proposals and bids outstanding worth around RM1.1 billion.(£157/$300 million)