9M18 CNP of RM116.3m makes up 74%/79% of our/consensus full-year estimates, which is within expectations. No dividend was declared, as expected. No changes to our FY18-19E CNP. Maintain OUTPERFORM with an unchanged SoP-driven Target Price of RM4.15.

Broadly within expectations. 9M18 CNP of RM116.3m (excluding forex and derivatives loss of RM9.3m), made up 74%/79% of our/consensus full-year estimates. However, we deem this as broadly within our full-year estimate as we expect a stronger performance inthe upcoming quarter. No dividend declared, as expected.

Results highlight. YoY, 9M18 CNP grew 39%, backed by: (i) growth in associate contribution (+23%) attributable to its Cambodian airport concession, and (ii) improvement in EBIT margin (+3ppt) to 9% backed by its construction division. QoQ, 2Q18 revenue grew 79%, but its CNP came off by 8% due to lower contribution from its associate (-3%) and increase in minority contribution (+132%) as they registered higher contribution from its crane division due to write-backs.

Company outlook. MUHIBAH’s outstanding order-book currently stands at c.RM1.8b (construction: c.RM1.3b, cranes: RM0.5b) providing at least two years of visibility. As for its associate, i.e. Cambodian Airports, we believe its traffic growth will remain robust at high teens. Going forward, we expect they would be able to maintain the traffic growth momentum, driven by traffic from China.

Earnings estimates. Post results, no changes to our FY18-19E earnings.

Maintain OUTPERFORM with an unchanged SoP-driven Target Price of RM4.15, which implies 12.7x FY18E PER. We deem the valuation reasonable if stacked against players like Malaysia Airports Holdings (AIRPORT) that trade >20x. To recap, its associate contribution of which the bulk is from its Cambodian airport made up c.60% of its 9M18 pre-tax profit, which is the major earnings driver for MUHIBAH.

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 - 29 Nov 2018