FY17 CNP of RM122.8m is well within expectations, making up 96%/99% of our/consensus full-year estimates. A 7.0 sen dividend was declared, higher than our expectation of 6.6 sen. Introduce FY19E CNP of RM143.7m. Maintain OUTPERFORM with an unchanged SoP-driven Target Price of RM3.55.

Within expectation. FY17 CNP of RM122.8m is well within expectations, making up 96%/99% of our/consensus full-year estimate. A 7.0 sen dividend was declared, higher than our expectation of 6.6 sen.

Results highlight. FY17 CNP grew 40% YoY despite weaker revenue (-15%). This is due to: (i) strong improvement in associate contributions (+125%) mainly driven by strong passenger traffic growth in Cambodia (+26%), and (ii) lower effective interest cost (-32%) due to lower net gearing, which came off to 0.3x from 0.6x. QoQ, 4Q17 CNP grew 33% due to strong growth in associate contribution (+189%) and also lower minority interest contribution (-30%).

Company outlook. MUHIBAH’s outstanding order-book currently stands at c.RM2.1b (construction: RM1.6b, cranes: RM0.5b) providing at least two years of visibility. As for its associate, i.e. Cambodian Airports, traffic growth remains robust at 26% YoY as of FY17 and we believe that they would be able to grow its existing passenger traffic by another 10% in FY18.

Earnings estimates. Post results, there are no changes to our FY18E CNP and we introduce FY19E CNP of RM143.7m.

Maintain OUTPERFORM. Reiterate OUTPERFORM with an unchanged SoP-driven Target Price of RM3.55 which implies 12.5x FY18E PER which is in line with our small-mid-cap peers’ range of 9.0x-13.0x. However, we believe the premium is justified due to the strong contribution from its concession assets.

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

Source: Kenanga Research - 01 Mar 2018