Muhibbah Engineering; Buy; RM2.35
Price Target: RM3.10; MUHI MK

Societe Concessionnaire De L’Aeroport (SCA) has awarded two contracts to a joint venture between Muhibbah (30% stake) and Vinci Construction Grands Projects for the refurbishment of the Phnom Penh and Siem Reap airports in Cambodia. The contracts are worth USD87m or RM276m and scheduled for completion by end 2015. Muhibbah has a 21% effective stake in SCA, the Build-Operate-Transfer concessionaire of three airports in Cambodia.

We are positive on the contracts. Based on Muhibbah’s 30% stake in the JV, the contracts translate into RM83m or 15% of our FY13 new contract win assumption. However, we think Muhibbah could potentially carry out a bigger bulk of the contracts’ execution and recognise higher profit.

We also expect Muhibbah to secure more overseas construction projects based on its favourable track record (such as Wiggins Island Coal Export Terminal in Australia and LNG Regasification Project in Melaka) and its expertise in O&G-related construction projects. Based on our FY13-15F forecast, we estimate its construction business to contribute about 11-17% of Group’s PBT.

We maintain our BUY recommendation on Muhibbah with a RM3.10 SOP-based TP. Muhibbah remains a cheap O&G proxy trading at 6-8x FY14-15F EPS.

Source: HwangDBS Research - 7 Nov 2013