Period  3Q14/9M14

Actual vs. Expectations  9MFY13 net profit of RM61.4m came in broadly within expectations, accounting for 69% and 67% of our and consensus, full-year estimates respectively. We consider it as broadly within our expectation as we expect higher billings in 4Q14, driven by orderbook progress from cranes and infrastructure divisions.

Dividends  None as expected.

Key Results Highlights QoQ, 3Q14 revenue and net profit fell by 19% and 3% mainly due to timing differences of revenue recognition as jobs in cranes and shipyard division have reach their projects’ tail-end in 2Q14, hence higher billings in previous quarter.

 YoY, 3Q14 net profit was flat (+1%) dragged down by lower contribution from shipyard division, which offset higher profits from cranes division (+39%).

 YTD, despite 9M14 PBT rising by 18%, driven by cranes and concession income, net profit was flat (+1%) due to higher effective tax rate given the expiration of Favco’s pioneer tax status in FY14. In addition, 9M14 EPS diluted marginally by 2% due to stock options (13m) and warrants (24m) exercised so far this year.

Outlook  Sizeable orderbook provides two years’ earnings visibility. Muhibbah’s orderbook currently stands at RM2.3b worth of unbilled orderbook of which RM875m is from infrastructure construction, RM1.2b from ranes division, and RM257 from shipyard division. This will provide Muhibbah earnings visibility for the next two years. We expect the group to secure another c.RM320m worth of new orders before year-end in infrastructure division to meet our FY14 new orderbook target of RM700m. So far, Muhibbah has already secured about RM378m worth of new contracts in FY14. We also expect the group to secure another RM700m worth of new orders next year.

 To benefit from RAPID. We also like the fact that the huge Petronas’ RAPID project (worth RM89b) has already kicked off with basic infrastructure jobs (i.e. site preparation works, power plant, access roads and off-loading facilities jetty) already awarded to various contractors (since June 2014). Given that the bulk of Muhibbah’s tenderbook is from RAPID and Pengerang projects, we reaffirm our view that Muhibbah will likely benefit from the contracts in RAPID and Pengerang. Note that Muhibbah also has excellent track records with Petronas previously (i.e. Malacca regasification terminal).

Change to Forecasts Unchanged.

Source: Kenanga