MUHIBBAH ENGINEERING (M) BHD

By RHB Research Buy (maintained) Target price: RM3.75

RHB Research is slightly positive on Muhibbah Engineering’s recent contract win as the contract value is within its order book replenishment assumption of RM1.1bil for the financial year 2017 (FY17).

Assuming a 5% net margin, the project is anticipated to yield a profit of RM9.3mil in total or 7.9% of RHB Research’s FY18 net profit forecast.

Recently, Muhibbah has clinched the RM189mil contract from Mass Rapid Transit Corp Sdn Bhd for the design, supply, installation, testing and commissioning of noise barriers and enclosures. The contract tenure is for two years.

“Project execution risk is low for Muhibbah, given its track record for engineering, procurement, construction and commissioning involving the Refinery and Petrochemical Integrated Development (Rapid) project as well as other oil and gas-related works.

“The job is expected to commence immediately and to be completed at end-2019,” said the research house in a note.

Overall, RHB Research remains sanguine on Muhibbah Engineering, largely attributed to the boom in the construction sector and recurring income base from its associate Cambodia Airports.

Cambodia Airports, which is 21%-owned by Muhibbah, is expected to register double-digit passenger growth in 2018, due to strong projected tourist arrivals. This is in line with the historical double-digit growth posted by the group.

“We anticipate more job wins in the near term with more infrastructure and marine-related projects to be secured. On the other hand, we believe its oil and gas-related jobs would account for a lower portion of its order book as its major Rapid-related contracts approach completion stages in 2018,” said RHB Research.

Muhibbah’s order book stands at RM2.1bil.