• 9MFY16 Results above expectations

• Results supported by construction and concessions

• Earnings estimates for FYE17/FYE18 intact

• Maintain BUY with an unchanged TP of RM3.05

9MFY16 Results above expectations. Muhibbah’s 9MFY16 PATAMI of RM86.6m (-41%YoY) arrived above our expectations registering for 79% and 82% of ours and consensus’ full year expectations respectively. The mixed reaction is a result of our conservative view of adjusting our estimates earlier to reflect the slower pace of project awards for RAPID in Pengerang.

Results supported by key strengths. The results was above our expectations attributable to contributions from (i) infrastructure construction and (ii) concession segments i.e. Cambodia Airports (30% stake via Muhibbah Masteron Cambodia). Infrastructure segment is backed by on-going jobs from oil and gas downstream infrastructure projects such as Effluent Treatment Plant, Aroma Chemical Complex and Steam Cracker Complex in RAPID, Pengerang. We are expecting a 25% of increase of Chinese and Vietnamese tourists to Cambodia that will further support the airport concessions.

Earnings estimates intact. Our earnings estimate for FYE16/17 intact due to its admirable orderbook which amounts to RM1.86bn providing ample earnings visibility for the next 36 months and 3.5x construction revenue cover.

Recommendation. We maintain our BUY recommendation with a TP of RM3.05 based on our sum-of-parts valuation. Additionally, Muhibbah’s current EV/EBITDA of 12.2x is below it peers median of 13.9x implying an attractive discount.

Source: MIDF Research - 30 Nov 2016