Muhibbah could replenish order book by RM1.5 billion this year
KUCHING: Analysts believe Muhibbah Engineering (M) Bhd can replenish its order book with contracts award amounting to RM1.5 billion this year.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) said this target was achievable given the company’s tender for contracts at the Refinery and Petrochemical Integrated Development ( RAPID) in Pengerang, Johor and other contracts in the Klang Valley such as Mass Rapid Transit Line 2 (MRT2), the Light Rail Transit Line 3 (LRT3) which could see job awards in the first half of 2017 ( 1H17).
Currently, Kenan ga Research noted the group’s outstanding order book stood at approximately RM2.1 billion, providing the group with at least two years of earnings visibility.
With the job in hand, the research firm expects Muhibbah to register a better financial performance for the fourth quarter of 2016 ( 4Q16) as it did not expect more provisioning from the group’s crane division coupled with a stronger contribution from its associates in 4 Q 16.
Meanwhile, Muhibbah told Bursa Malaysia on Tuesday that its 49 per cent associate Muhibbah Engineering Middle East LLC had on January 9 formalised a contract with the Economic Zones Company of Qatar ( MANATEQ), for the construction of roads and infrastructure works in Um Alhoul Economic Zone, Phase 2.1 amounting to RM438.1 million.
The company revealed that the construction works for the project starts immediately and is expected to be completed by the second quarter of 2018.
This contract represents its first of the year.
With an assumption of profit before tax margins of eight per cent, the research firm forecasted for income from the project to contribute approximately RM26.3 million to Muhibbah’s bottom line over the period of 18 months.
As the amount of the contract award was within the research firm’s order book assumption for the company this year, Kenanga Research has maintained its earnings forecast for Muhibbah at this juncture while assigned a neutral rating on the outlook of the company.
Besides, the research firm foresees no further catalyst to upgrade the prospects of the company, unless the company is able to surpass the research firm’s order book replenishment target of RM1.5 billion for financial year 2017.