1HFY21 CNL of RM5.1m is within our, but below consensus overly optimistic, projection. No dividends as expected. We believe Muhibah’s Cambodian airports are poised for imminent recovery in FY22 when travel restriction eases. Separately, its construction division’s profitability continued to perform poorly with order-book still deteriorating amidst absence of replenishments. All in, with current share price still not reflecting the deep value in its Cambodian airports, we maintain OP and TP of RM1.25.

Within our expectation but below consensus’. 2QFY21 CNP of RM0.6m lifted 1HFY21 core net loss (CNL) to RM5.1m – within our CNL projection of RM20m but below consensus’ optimistic profit projection of RM20m. Its Cambodian airports are unlikely to see passenger traffic rebound in 2HFY21 given the travel restrictions still in place while its construction profitability should remain muted i.e. breaking even or posting marginal losses. No dividends as expected.

QoQ, 2QFY21 CNP of RM0.6m improved against 1QFY21 CNL of RM5.7m mainly due to better PBT contributions (+51%) from its crane division i.e. Favco. YoY, 1HFY21 CNL of RM5.1m narrowed from RM20m loss registered in 1HFY20 mainly due to stronger PBT contributions at its construction division attributable to better margin mix projects.

Bright spots emerging for Cambodia. We maintain our view that airport passenger traffic at Cambodia will only gradually increase in FY22 when travel restrictions are eased. Currently, while the strict travel restrictions imposed since the onset of the pandemic are still in place, the Cambodian Tourism Ministry has recently announced that fully vaccinated tourists could be allowed into the country as soon as Nov 2021. Vaccination rates in Cambodia are also relatively high at 66% against other South East Asian countries.

Construction division continued to deteriorate. Meanwhile, the group’s outstanding order-book has shrunk further to RM0.94b (-1% QoQ; -22% YoY) due to weak contract replenishments. Out of this order-book sum, RM0.584b is from the crane division while the rest are from construction. Note, order-book has been on a downtrend since 2018 and currently provides <1x revenue cover.

Maintain OP with unchanged SoP-TP of RM1.25 as current share price provides a deep bargain for its Cambodian airports in anticipation for a recovery ahead.

In our SoP/share of RM1.25, we have: (i) ascribed a -2.5SD PBV (lowest in our universe) to its construction division due to its volatile earnings and depleting order-book, and (ii) fully omitted Phnom Penh airport from the concession valuation as we understand there is a Chinese party having an airport built within the vicinity (prior to Covid- 19) which could challenge its status as the sole airport concessionaire in Cambodia. However, there has been no update on this new airport since the Covid-19 pandemic started. Should we impute Phnom Penh airport into our valuations, SoP-TP would be enhanced by RM0.85.

Source: Kenanga Research - 1 Oct 2021