INVESTMENT HIGHLIGHTS

• Muhibbah was awarded a new job, for provision of EPCI (Engineering, Procurement, Construction and Installation) for the Wellhead Platform for East Cendor Field Development (Phase 1)

• The whole project carries a value worth RM150m, expand the group’s orderbook to RM1.2b

• No change to forecasts as earnings came in within our replenishment assumptions

• Maintain BUY with an unchanged TP of RM3.73

Muhibbah was awarded a new job, for provision of EPCI (Engineering, Procurement, Construction and Installation) for the Wellhead Platform for East Cendor Field Development (Phase 1) for client Petrofac Malaysia, with works scheduled immediately to run for eleven months. Based on this timeline, we estimate its completion to be within 3Q20.

The whole project carries a value worth RM150m, in approximation. Accordingly, the new contract win will expand the group’s orderbook to RM1.2b. We are positive on the new job which will begin to contribute to core earnings in the immediate term.

Impact to earnings. No change to forecasts as earnings came in within our replenishment assumptions.

Muhibbah outstanding orderbook at RM1.2b. This will provide visibility of two years for its construction revenue. Moving forward, it is hopeful to participate in the tender call for ECRL, with anticipated job worth of RM9b-RM11b for local contractors. Should it win RM500m worth of the jobs, its orderbook will be raised by a meaningful +45%.

Recommendation. We believe the prospect remains encouraging for Muhibbah, taking into account the supports from its airport concession and the crane segment. As a construction company, its presence in other specialised business will provide competitive edge against the other domestic construction players. We are encouraged to see that both segments have been significant contributors to earnings. Maintain BUY with an unchanged TP of RM3.73.

Source: MIDF Research - 29 Aug 2019