INVESTMENT HIGHLIGHTS

• Muhibbah’s PATAMI in 2QFY19 came in at RM30.9m (-6.5%yoy), bringing the YTD earnings in 1HFY19 to RM63.9m (-7.7%yoy)

• As of August 2019, the group’s orderbook stood at RM1.1b to keep the group’s busy in the next two years

• Airport Concession contributed to 54% of the group’s overall earnings in 2QFY19 at RM31.8m (-10.6%yoy).

• No changes to our earnings estimate at this juncture

• We recommend a BUY on the stock with unchanged TP of RM3.73

Muhibbah’s PATAMI in 2QFY19 came in at RM30.9m (- 6.5%yoy), bringing the YTD earnings in 1HFY19 to RM63.9m (-7.7%yoy). Cumulatively, it accounted for 49.0% and 38.9% of our and consensus estimates respectively. Cranes segment staged the highest growth 1HFY19, with PBT recorded at RM40.9m (+113.0%yoy). However, earnings from infrastructure segment was subdued, with PBT posted at only RM25.7m (-19.5%yoy).

Infrastructure Construction. The decline was despite revenue being higher by +21.6% in 1HFY19 at RM682.5m. It was due to PBT margin squeezed by -1.9pptsyoy in the period, stemmed from higher operational costs. As of August 2019, the group’s orderbook stood at RM1.1b to keep the group’s busy in the next two years. Its latest job win was awarded by Petrofac Malaysia, for the provision of WPIC worth RM147m. As for cranes, its unbilled job amounted to RM562m, with 58% made up of offshore cranes job.

Airport concession. It contributed to 54% of the group’s overall earnings in 2QFY19 at RM31.8m (-10.6%yoy). The drop was due to high base effect from last year, stemmed from a strong growth of passenger traffic grew of +20.0%yoy. Nonetheless, we believe its contribution in 2QFY19 remains strong.

Impact to earnings. No change to forecasts as earnings came in within estimation range.

Recommendation. We believe the prospect remains encouraging for Muhibbah, considering 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. Maintain BUY with an unchanged TP of

RM3.73.

Source: MIDF Research - 30 Aug 2019