INVESTMENT HIGHLIGHTS

• Clinched RM149.0m contract from Qatar government

• Award within our job replenishment assumption

• Reaffirm our earnings estimates

• We maintain our BUY recommendation with an unchanged TP of RM3.60

RM149.0m job in Qatar’s SEZ clinched. Muhibbah has accepted the award of design and construction of syncrolift and travel lift from the Special Economic Zones Company of Qatar for a sum of RM149.0m. The project is located Um Alhoul Special Economic Zone, Qatar which is managed by MANATEQ. The contract is formalised through its 49.0% subsidiary; Muhibbah Engineering Middle East LLC.

Award within our job replenishment assumption. The award was within our job replenishment assumptions of RM600m with our current estimate of unbilled orderbook of RM1.8bn. Notably; the project is within the marine cluster of QEZ3 which falls under Muhibbah’s expertise core expertise for example the syncrolift is a system for raising vessels out of the water for maintenance work or repair. The vessel is piloted over an underwater cradle, which is then elevated by a set of synchronized hoists or winches. (Figure 1)

Impact on earnings. Nonetheless, we make no changes to our FYE18/FYE19 earnings forecasts. As stated in above, the award is within our job replenishment target of RM600m and factored in the marginal assumptions of 9.5% on the back of 49.0% shareholdings in the JV company. The project is expected to contribute to RM14.2m to the bottom line which constitute +10.4% of its PATAMI.

Recommendation. We maintain our BUY recommendation with a TP of RM3.60 per share based on sum-of-parts valuation (SOP) Muhibbah remains as one of our top pick for small-cap construction companies. Its shares are trading at an undemanding PER of 11.5x below the KLCI average of 16.9x by 5.4ppts and its peers in KL Construction Index of 22.5x by 11.0ppts.

Source: MIDF Research - 23 Feb 2018