FY21 CNL of RM19.4m is within our, but below consensus’ overly optimistic, projection. No dividends as expected. Its construction division’s profitability continued to perform poorly with order-book still deteriorating amidst the lack of replenishments. Maintain MP with an unchanged SoP-TP of RM0.60.

Within our expectation but below consensus’. 4QFY21 CNP of RM2.1m help narrowed FY21 core net loss (CNL) to RM19.4m – within our CNL projection of RM19.8m but below consensus’ CNL projection of RM6.1m as they may have been overly optimistic projecting the rebound in concession earnings coming from Cambodian airports upon the reopening of Cambodian borders from 15th Nov 2021. No dividends as expected.

Highlights. QoQ, 4QFY21 CNP of RM2.1m turned black from a CNL of RM16.3m on higher revenue (+56%) and stronger margins amidst the absence of lockdown as experienced in 3QFY21. YoY, FY21 CNL of RM19.4m narrowed from RM72m loss registered in FY20 mainly due to stronger PBT contributions at its construction division, attributable to better margin mix projects.

Higher passenger traffic in Cambodia in the near future. Since 15 Nov 2021, the Cambodian government has eased travel restrictions and allowed fully vaccinated travellers to visit the country without quarantine. We anticipate a gradual rise in passengers starting from FY22. Despite so, we note that Phnom Penh’s new international airport is undergoing construction and its first phase should see completion by 2023. As far as we understand, this new airport will cater for future international passengers while Muhibah’s 21%-associate airport will then only cater for domestic flights.

Construction division in survival mode. Outstanding order-book continues to deteriorate, to RM0.83b (-7% QoQ; -15% YoY) despite RM50.3m of new orders secured YTD. Its outstanding order-book has been on a downtrend since 2018 due to the lull in replenishments. Out of this order-book sum, RM0.524b is from the crane division while the rest are from construction. Note, order-book currently provides <1x revenue cover.

Keep FY22E earnings of RM25.5m and introduce FY23E earnings of RM50.2m backed by 7.0m passenger traffic target for its Cambodian airport.

Maintain MP with unchanged SoP-TP of RM0.60. While current share price provides a bargain for a recovery play at its Cambodian airports, the immediate concern over its rights proposal may pose as an overhang for the stock. The 1-for-2 rights should see completion in April 2022.

Risks to our call include: (i) lower-than-expected order-book replenishment target, (ii) delays in construction progress, and (iii) sharp spike in raw material costs.

Source: Kenanga Research - 1 Mar 2022