Stock Name: MUHIBAH
Company Name: MUHIBBAH ENGINEERING (M) BHD
Research House: KENANGA

KUALA LUMPUR: Muhibbah Engineering Bhd has accepted a contract from Penang Port Sdn Bhd for the design, assembly and delivery of eight cranes for about RM56 million.



The company said on Thursday, Sept 9 the rail mounted gantry cranes would be delivered over 26 months.



"The contract is expected to contribute positively to the earnings and net assets of Muhibbah group for the current and future financial years," it said.



In a recent report, Kenanga Investment Bank research said the outlook for Muhibbah "is bright provided Muhibbah can collect its receivables from Asian Petroleum Hub otherwise provisions would have to be made for doubtful debts".



Excluding the Penang Port contract, Muhibbah had RM2.53 billion order book remaining as at June 30, 2010 made up of RM1.6 billion in infrastructure, RM450 million in cranes and RM484 million in ships.



Kenanga Research said Muhibbah continued to be active in bidding for projects and just won a RM124.4m contract to construct an offshore marine centre in Tuas, Singapore.



"We have lowered our FY10 and FY11 net profit by 17% and 11% to RM46m and RM52.1m respectively factoring in slower recognition of profit from the Asia Petroleum Hub project.

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"Maintain BUY with a target price of RM1.35 (previously RM1.80) using a sum of parts RNAV. Rerating catalyst for the stock is the payment of its outstanding receivables. The stock is only trading at a low PER of 8x and 7x for FY10 and FY11," it said.