Stock Snippet – Muhibbah Engineering (M) Bhd
Highlights:-
We met the management of Muhibbah 2 days
ago in CIMB Corporate Day.
Beneficiary of 10MP and ETP – Given Muhibbah’s strong 36 years track record as a contractor specialising in onshore works, oil and gas(O&G), marine and offshore works. Muhibbah is expected to benefit from 10MP spending on construction sector and ETP’s emphasis on the O&G sector. Per the management, they have tendered for various construction jobs such as the RM7bn LRT extension/upgrade works and construction of terminal jetty worth RM200m-300m which is part of Dialog’s RM3.5 bn deepwater petroleum terminal facility.
Recovery in Asia Petroleum Hub (APH) –
Per the management, they are expecting APH Source: Bloomberg long-drawn payment issue to be resolved in 1Q11. This is positive for Muhibbah as the funds inflow will save approx. RM12m interest costs and reduce its net gearing, thereby enhancing its capacity to finance more new projects in future.
Exclusive Rights for Privatisation of Cambodian International Airports – The management reiterated the fact that via Muhibbah’s 30% owned Societe Concessionaire de l’ Aeroport (SCA), SCA have exclusive rights for all international airports in Cambodia until year 2040 allowing them to earn airport related management fees. This buoys well for Muhibbah given the booming tourism and O&G industry in Cambodia.
In the Running for Vale’s RM3 bn Project– The management is also optimistic with their maritime terminal
construction track record which will enable them to clinch a slice of Vale’s RM3 bn maritime terminal and stockyard facility in Perak. The potential value of Muhibbah’s scope of work is approx. RM500m- 1 bn.
For the first 3 quarters, the EPS grew to 6.2 sen including 3rd quarter EPS of 2.2 sen, On an annualised basis, Muhibbah is trading at 21.4x FY2010 earnings. Its share price went up in anticipation of Muhibbah securing more contracts from now on. Price is running ahead of fundamental for the time being.
Recommendation: We are Neutral on Muhibbah.
Share Price: RM1.80