MUHIBAH (5703) : Muhibbah Engineering - Stronger job prospects ahead
Target RM3.64 (Stock Rating: ADD)
Muhibbah's annualised 9M14 core net profit made up 89% of our full-year forecast and 91% of consensus. The results were broadly in line, as the timing of jobs secured YTD for both infra and cranes should support a better 4Q. The group has secured RM378m worth of smaller-sized oil & gas-related infra jobs and RM435m worth of crane orders YTD. This excludes the maiden wins from Rapid, which may materialise soon. Our FY14-16 EPS forecasts are intact, as is our target price, still pegged to a 20% RNAV discount. The recent decline in share price is a buying opportunity, given the potential re-rating catalysts of job wins. Maintain Add. Muhibbah is our preferred pick in the small/mid-cap space. It trades at undemanding FY14-16 P/Es of 9-10x.
3Q14 results broadly in line
Annualised 9M14 core net profit made up 89% of our full-year forecast and 91% of consensus. We deem Muhibbah’s 3Q14 performance broadly in line as we expect 4Q14 to be stronger, supported by the steady job wins from the infra and cranes segments. The 6.2% group EBIT margin achieved in 9M14, higher than the 4.7% in 9M13, reflects the improving tender environment, especially for the oil & gas-related infra space, in the past 9-12 months. The falling global oil price remains a positive for downstream contractors like Muhibbah as it translates into lower costs. This could support upside to margins. No dividends were declared, in line with our expectation.
Upside to order book from higher-value projects
A press report clarifying the group's tender position for the Pengerang regasification facility should assure investors that the group continues to bid for specialised projects of higher value. Although the group did not secure the EPCC works for the Pengerang plant, we gather that it is tendering for the c.RM1bn jetty package. This potentially adds on to the c.RM1bn value of total jobs targeted in Rapid. We expect the awards for the subcontract package from the refinery contract in Rapid to start in the near term .
Fundamentals and job outlook remain strong
Muhibbah’s share price offers value, as it trades at undemanding FY14-16 P/Es of 9-10x. The stock remains oversold. Prospects could surprise on the upside if Muhibbah succeeds in landing higher-value oil & gas infra packages beyond Rapid. Job flow outlook remains supported by other domestic projects.
Source: CIMB Daybreak - 01 December 2014
Target RM3.64 (Stock Rating: ADD)
Muhibbah's annualised 9M14 core net profit made up 89% of our full-year forecast and 91% of consensus. The results were broadly in line, as the timing of jobs secured YTD for both infra and cranes should support a better 4Q. The group has secured RM378m worth of smaller-sized oil & gas-related infra jobs and RM435m worth of crane orders YTD. This excludes the maiden wins from Rapid, which may materialise soon. Our FY14-16 EPS forecasts are intact, as is our target price, still pegged to a 20% RNAV discount. The recent decline in share price is a buying opportunity, given the potential re-rating catalysts of job wins. Maintain Add. Muhibbah is our preferred pick in the small/mid-cap space. It trades at undemanding FY14-16 P/Es of 9-10x.
3Q14 results broadly in line
Annualised 9M14 core net profit made up 89% of our full-year forecast and 91% of consensus. We deem Muhibbah’s 3Q14 performance broadly in line as we expect 4Q14 to be stronger, supported by the steady job wins from the infra and cranes segments. The 6.2% group EBIT margin achieved in 9M14, higher than the 4.7% in 9M13, reflects the improving tender environment, especially for the oil & gas-related infra space, in the past 9-12 months. The falling global oil price remains a positive for downstream contractors like Muhibbah as it translates into lower costs. This could support upside to margins. No dividends were declared, in line with our expectation.
Upside to order book from higher-value projects
A press report clarifying the group's tender position for the Pengerang regasification facility should assure investors that the group continues to bid for specialised projects of higher value. Although the group did not secure the EPCC works for the Pengerang plant, we gather that it is tendering for the c.RM1bn jetty package. This potentially adds on to the c.RM1bn value of total jobs targeted in Rapid. We expect the awards for the subcontract package from the refinery contract in Rapid to start in the near term .
Fundamentals and job outlook remain strong
Muhibbah’s share price offers value, as it trades at undemanding FY14-16 P/Es of 9-10x. The stock remains oversold. Prospects could surprise on the upside if Muhibbah succeeds in landing higher-value oil & gas infra packages beyond Rapid. Job flow outlook remains supported by other domestic projects.
Source: CIMB Daybreak - 01 December 2014
