MUHIBAH bagged two contracts from Petronas with total value of RM205.0m. Neutral as it is within our order-book replenishment thus no changes to our FY18-19E net earnings. BUY with a Target Price of RM4.15 or a 12.7x FY18E PER which we deem to be reasonable. To recap, its associate contribution of which the bulk of it is derived from Cambodia airport circa.60% 9M18 pre-tax profit and is a major earnings driver for MUHIBAH.

MUHIBAH have bagged two contracts from Petronas with a total sum of RM205.0m. The scope of works for these two projects are (i) engineering, procurement, construction, installation & commissioning ("EPCIC") of seawater overboard upgrading, firewater network improvement and new pressure control (PCV) installation project in Melaka, and (ii) EPCIC of Yetagun acid gas removal unit project in Myanmar, which is expected to complete by first and second quarters of 2020.

We are neutral on the wins as it is still within our replenishment assumption of RM400.0m for 2018. To date, MUHIBAH has secured c.RM300.0m worth of external jobs bringing its outstanding order-book to c.RM1.5b for its construction arm. Its total outstanding order-book including its crane division is c.RM2.0b. Assuming pre-tax margins of 8%, these latest wins would contribute c.RM9.0m to its FY19 bottomline.

MUHIBAH's outstanding order-book currently stands at c.RM2.0b (construction: c.RM1.5b, cranes: RM0.5b) providing at least two years of earnings visibility. As for its associate, i.e. Cambodian Airports, we believe that traffic growth will remain robust at high teens and remains as one of its major earnings contributors. Going forward, we expect they would be able to maintain the traffic growth momentum, driven by traffic from China.

Source: Rakuten Research - 24 Dec 2018