Muhibbah Engineering (M) Bhd
(March 25, RM2.36)
Maintain buy with an unchanged target price (TP) of RM3.34: Muhibbah Engineering (M) Bhd hosted a group of analysts and fund managers to Cambodia for the 20th anniversary of Cambodia Airports, a joint venture it has with Vinci SA. The visit also coincided with the completion of airport extensions, which saw Cambodia Airports doubling its passenger capacity to 12 million passengers per annum. Cambodia Airports charted a double-digit growth in its financial year 2015 (FY15) passenger traffic, marking its sixth consecutive year of such growth.
It was driven by its two main international airports — Phnom Penh International Airport and Siem Reap International Airport. According to the tourism ministry, approximately 95% of visitors to Cambodia are leisure travellers. Sihanoukville Airport was recently upgraded to an international airport, owing to the province’s popularity as a premier beach and resort destination. It saw a passenger growth of 118% year-on-year in 2015.
We are expecting Cambodia Airports to register double-digit annual growth in passenger traffic until 2020 and estimate contributions from Cambodia Airports to make up 39% of Muhibbah’s profit before tax in FY16.
Petroliam Nasional Bhd’s refinery and petrochemical integrated development (Rapid) is expected to come online in 2019, and thus we forecast peak capital expenditure (capex) spending for the project to kick in from end-FY17 to FY18. Rapid projects make up an estimated one-third of Muhibbah’s current tender book of RM5 billion, while the rest of the tenders comprise infrastructure construction and marine infrastructure projects. We estimate Muhibbah to win RM600 million and RM800 million worth of projects in FY17 and FY18 across all three segments, and believe our expectations are conservative, considering the timing of the Rapid’s peak capex spending.
We continue to like Muhibbah, as its exposure to the Rapid would provide a potential earnings upside with stable cash flows coming from its Cambodia Airports concessions. We maintain our “buy” recommendation with a sum-of-parts-derived TP of RM3.34. Risks to Muhibbah are lower-than-expected order book replenishment and slower passenger growth for its airports. We made no change to our forecasts. — RHB Research Institute, March 25
MUHIBAH (5703) - Muhibbah seen winning RM600m projects in FY17
http://www.theedgemarkets.com/my/article/muhibbah-seen-winning-rm600m-projects-fy17
