News

Yesterday, MUHIBAH announced that they along with their consortium partner VA Tech Wabag Limited have secured a contract worth RM949.6m from PRPC Utilities and Facilities Sdn. Bhd. for the design competition for re-feed and engineering, procurement, construction and commissioning of the Effluent Treatment Plant (ETP) for the RAPID Project in Pengerang, Johor, Malaysia

This contract is scheduled to commence in 3Q15 and slated for completion in the end of 2018.

Comments

We are positive with the contract award, as this is MUHIBAH’s third job and is also the largest job win from RAPID, amounting to RM949.6m. To recap, MUHIBAH secured two RAPIDrelated jobs amounting to c.RM274m for FY15, while its total orderbook replenishment amounted to RM542.9m prior to this contract award.

Assuming MUHIBAH’s job scope in this particular contract at 30% of its entire contract value of RM949.6m, MUHIBAH’s share is RM282m, bringing YTD orderbook replenishment to RM826.0m, which is still inline with our FY15E estimate of RM800m.

Outlook

Currently, its outstanding orderbook stands at RM2.4b providing the group at least two years of visibility, and we believe it will be busy executing on-going projects in RAPID.

Forecast

No changes to earnings, as orderbook replenishments are still within our estimate.

Rating

Maintain OUTPERFORM

Valuation

We reiterate our OUTPERFORM call on MUHIBAH with an unchanged TP of RM2.72. Our SoP-based TP of RM2.72 implies FY16E PER of 12.5x (0.5x SD), inline with our target small-mid cap construction peers’ range of 9.0x – 14.0x.

Risks to Our Call

Failure in meeting our new contracts assumption

Delays in construction projects

Higher-than-expected input costs

Source: Kenanga Research - 4 Sep 2015