Journey to Wealth
Muhibbah Engineering - OUTPERFORM - 1 June 2012
Period 1Q12
Actual vs. Expectations
Within ours and the consensus expectations.
The 1Q12 net profit of RM16.3m made up 22% of ours and the consensus' forecasts of RM74.2m and RM74.6m, respectively.
Dividends No dividend declared during the quarter.
Key Result Highlights
QoQ net profit leaped up 30% despite a 20%-drop in revenue. The decrease in revenue was mainly due to lower contribution from its construction division, following the completion of SKVE (Package S2) construction works and lower progress billing during the shorter period in 1Q12.
YoY revenue grew by 6% but pre-tax profit down marginally by 1%. The revenue from crane division increased by 165% due to built-up order book in late FY11. Its 21% effective stake in Cambodia airports is bearing fruit. The associated company contributed 22% to the group's pre-tax profit YTD.
Current order book stands at RM2.9b comprises of RM2.16b from construction division, RM702m from cranes division and RM95m from shipyard division. These jobs provide earnings visibility up to 2014.
Outlook The APH issue is still ongoing with the receivership is in the midst of validating the invoices and bills related to the construction of APH.
To recap, APH is already 60% completed while the remaining balance works will require another 1 to 2 years to complete.
Change to Forecasts
We revise our FY13E earnings higher by 27% as we imputed in additional RM200m worth of new contracts in our forecast.
Rating OUTPEFORM
Our OUTPERFORM rating is maintained as the current share price implies 63% upside from our Target Price.
Valuation We are keeping our target price unchanged at RM1.97 based on SOP valuation.
The next re-rating catalyst would be higher than expected new contracts in FY12 i.e. > RM500m.
Risks Prolonged receivership status for APH
Source: Kenanga
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
