Conclusion
We trim our revenue estimates for Fara due to the low activity year to date and the increased macro uncertainty. Nevertheless, we reiterate our Buy recommendation as we expect new contract announcements in H2 2010 and operational results to improve going forward.

• Fara’s share price dropped 22% following the Q1 report on the back of weak order intake during the closed quarter. However, we believe the focus going forward should be on improving operational results.
• We trim our revenue estimates by around 8% for 2010 and beyond due to the increased macro uncertainty and the low activity year to date. Nevertheless, we believe that the outlook for the company remains positive and expect increased activity in H2 2010.
• The company is nearing the completion of the new ticketing platform, which will consolidate three existing platforms into one solution. This is expected to lead to significant cost savings and the resources made available could be used to further support growth during 2011.
• We expect a number of new contracts to be announced both in the Nordics and CEE (Central and Easter Europe) in H2 2010. The announcement of contracts outside the Nordic region would mark a new period of growth for Fara.
• Our updated estimates together with the peer multiples for 2010 and our DCF valuation yield a target price of NOK 0,75 per share. We believe the upside potential will materialise due to expected new contract announcements and improved operational results during the rest of 2010. Thus, we reiterate our Buy recommendation 6 months forward.

Download the report here: FARA Terra Markets Report 2010-06-07