DB first rates Far East Global (HKG:0830) Buy


Deutsche Bank stated in its research report that it believes Far East Global Group (HKG:0830) (FEG) has substantial upside potential in enhancing its earnings profile due to strong organic growth from its curtain wall engineering business as a result of continuous recovery in key markets. The brokerage is confident about seeing the company entering a new high-growth phase as a result of strong support from China Overseas Group and initiates coverage on the company with a Buy rating and a target price of HK$2.68.

The brokerage believes there is good potential for FEG to participate in parent China State Construction Engineering Corp's (CSCEC) overseas construction and curtain wall businesses. If realized, this should add meaningful contract backlog and revenue. CSCEC's overseas operations, excluding China State Construction International (HKG:3311), generate revenues of about RMB30 billion and the China curtain wall business generates RMB13-18 billion in annual production value. Assuming FEG takes a meaningful stake (30-50%) in these businesses with total annual revenue reaching RMB48 billion, the amount of potential new revenue contribution to FEG could be in multiples (13-24 fold) of its current business scale.



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