Last Friday, MUHIBAH’s 51%-owned subsidiary MUHIBAH VICCANA JV bagged a contract worth RM584.4m from Bintulu Port Authority. Neutral on the win as it is part of our FY17E replenishment assumptions of RM1.5b. No change in FY17-18E earnings. Maintain MARKET PERFORM with a higher SOP-driven Target Price of RM2.94 (previously, RM2.74) after rolling forward to FY18E.

Contract award from Bintulu Port. Last Friday, MUHIBAH announced that their MUHIBAH VICCANA JV has secured a contract amounting to RM584.4m from Bintulu Port Authority to undertake the works known as the design & build for the development of supply base wharf and associated works in the Second Harbour Basin, Bintulu Port, Bintulu, Sarawak which completion is expected by end of 2019.

Neutral on win. This particular award from BIPORT amounting to RM584.4m to Muhibbah (51%) Viccana (49%) JV marks the second job win of the year for MUHIBAH. Effectively, MUHIBAH would have replenished its order-book by another RM298.0m bringing its year-todate order-book win to RM736.1m. However, we are neutral on the contract win given that it is within our FY17E order book replenishment of RM1.5b. Assuming PBT margins of 10%, we expect the contract to contribute c.RM22.4m to its bottom line over the contract period of approximately 30 months.

Company outlook. This contract will bring MUHIBAH’s outstanding order book to c.RM2.0b from c.RM1.7b which provides at least two years of visibility. For FY17, we believe that our order-book replenishment target of RM1.5b is achievable as they have already achieved c.50% of our target. Furthermore, we believe that MUHIBAH still stands a good chance in securing contract awards from RAPID, and other infrastructure jobs from Middle East and LRT3.

Earnings estimates. Post award, we make no changes to our FY17- 18E earnings.

Maintain MARKET PERFORM. We are keeping our MARKET PERFORM call with a higher SoP-driven Target Price of RM2.94 from RM2.74 after we rolled our valuation forward to FY18E. However, our TP of RM2.94 implies 14.3x FY18E PER which is slightly higher compared to our small-mid-cap peers range of 9.0x-13.0x.

Risks include: (i) failure to meet order-book replenishment target, (ii) delays in construction progress, and (iii) sharp spike in raw material costs.

Source: Kenanga Research - 2 May 2017