Period

4Q15/FY15

Actual vs. Expectations

MUHIBAH FY15 CNP of RM88.9m after excluding forex and derivatives losses came inline with our but above consensus full-year estimates at 103% and 92%, respectively.

We believe that consensus could have been slightly aggressive on their construction margin assumptions.

Dividends

5.0 dividends declared, spot on with our full-year expectation.

Key Results Highlights

YoY, FY15 CNP continued to register a growth of 9%, albeit on a lower revenue (-6%). The improvement is mainly driven by the improved performance from its associate contribution (+30%) coming from its airport concession in Cambodia, while the lower revenue was due to its shipyard business that saw a 77% decline in revenue.

QoQ, the decline in 4Q15 CNP was steep at 85%, despite a 10% growth in revenue. The steep decline in profits was mainly due to the impairment sum of RM17.6m incurred for the receivables from its crane division.

Outlook

As of Feb-16, MUHIBAH’s outstanding orderbook stands at RM2.3b, easily providing the group at least two years of visibility. Besides, the prospect for MUHIBAH remains the same, of which they would continue to focus in RAPID, while bidding for MRT2 and other infrastructure jobs.

Change to Forecasts

No changes to our FY16E CNP, while we introduce our FY17E CNP of RM104.9m.

To recap, MUHIBAH has managed to secure two contract awards recently amounting to RM228.9m which is still within our orderbook replenishment assumption of RM1.6b with RM1.0b remaining after factoring the two previous contract awards.

Rating

Maintain OUTPERFORM

Valuation

We reiterate our OUTPERFORM call on MUHIBAH with an unchanged TP of RM2.79. Our SoP-based TP of RM2.79 implies FY16E PER of 14.1x which is inline with our target small-mid cap construction peers’ range of 9.0x–14.0x, and we continue to like MUHIBAH for its diversified earnings profile coupled with their strong presence in RAPID.

Risks to Our Call

Failure in meeting our new contracts assumption

Delays in construction projects

Higher-than-expected input costs

Source: Kenanga Research - 1 Mar 2016