INVESTMENT HIGHLIGHTS

• Two contracts with combined value of RM205m awarded to Muhibbah Engineering by Petronas

• Positive news, as the contract value filled up our replenishment assumptions

• Current outstanding order book stands at RM2.1b

• Maintain estimates for FY18F and FY19F

• Reiterate our BUY call with unchanged TP of RM3.15

Two contracts with combined value of RM205m were awarded to Muhibbah by two wholly-owned subsidiaries of Petronas. The contracts comprise procurement, construction, installation & commissioning (EPCIC) jobs. The contract works are scheduled to complete by the first half of 2020. Please refer details on Exhibit 1.

Award within our job wins assumptions. The awards were within our job replenishment assumptions of RM600m. Our estimate of unbilled order book now stands at RM2.1bn. Hence, we are not making any adjustments to our FY18F-FY19F forecasts.

Current outstanding order book stands at RM2.1b, following the addition of the two contracts awarded. About RM515m or 25% of the total outstanding order book came from crane jobs, which were awarded to its subsidiaries. On tender book, it currently stands at about RM4.1b, of which 76% are related to infra jobs.

Recommendation. We maintain our BUY recommendation on the stock with an unchanged TP of RM3.15. We ascribe PE multiples of 15x to FY19EPS, which reflects the conservative current sector wide valuation on construction stocks. Our TP implies a +18.2% upside and earnings yield of 6.6%.

Source: MIDF Research - 24 Dec 2018