Muhibbah’s core earnings of MYR81.2m were in line with our estimate (78% of our full-year projection) while beating that of the consensus at 81% of the full-year forecast. Maintain BUY with a SOP-based TP of MYR3.34 (54% upside). We continue to like Muhibbah for its diversified construction capability coupled with its Cambodian Airports concession, which provides stable cash flow.

Core earnings of MYR81.2m. Muhibbah Engineering’s (Muhibbah) 9M15 revenue growth was flat YoY. On a segmental basis, the revenues of its infrastructure construction and marine construction units rose 47% and 30% YoY on higher orderbook recognition while that of its marine and shipbuilding division slowed down 67% YoY due to lower shipbuilding orders. Associate contributions surged 35% YoY from its Cambodian Airports concession which is recording strong passenger traffic.

Outlook. The first petrochemicals package from Refinery and Petrochemical Integrated Development (RAPID) has already been awarded by Petronas Chemicals, and we anticipate two more main packages to be handed out soon. As Muhibbah has a track record in petrochemicals and oil & gas construction, we believe that it stands a good chance of bagging more RAPID-related contracts.

Offshore construction award. In Jun 2013, it was awarded a license for offshore construction from Petronas. The company announced an engineering, procurement, construction, installation and commissioning (EPCIC) award for the Ophir field development project for MYR93m-100m. YTD, Muhibbah has won YR830m worth of new orders.

Maintain BUY with a TP of MYR3.34. With the results coming in line with our expectations, we make no changes to our earnings estimates. We continue to like Muhibbah due to the following: i) it is a beneficiary of RAPID, ii) it has construction capability across oil & gas, civil and marine fields, as well as iii) stable cash flow from its Cambodian Airports concession, which is exhibiting double-digit passenger growth YoY. Maintain BUY with a SOP-based TP of MYR3.34.

Ophir field development award. Muhibbah announced last week that it won an EPCIC award for a well-head platform for the development of Ophir field. The contract is worth MYR93m-100m and works are scheduled to be completed in 14 months. Ophir field is a small-field risk service contract that was awarded to Octanex (OXXCB AU, NR), Scomi Energy (SES MK, NR) and Vestigo, a subsidiary of Petronas. YTD, Muhibbah has won MYR830m worth of contracts.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Muhibbah Engineering is a niche global oil & gas and infrastructure specialist that is involved in construction, crane manufacturing, shipyard and the concession business.

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Source: RHB Research - 30 Nov 2015