Stock Name: MUHIBAH
Company Name: MUHIBBAH ENGINEERING (M) BHD
Research House: KENANGA
Muhibbah Engineering Bhd
(Sept 3, 90 sen)
Maintain buy at 88.5 sen with lower target price of RM1.35 (from RM1.80): Muhibbah's 1H2010 net profit of RM16.1 million was below expectations at 29% and 28% of our forecast of RM55.6 million and RM56.5 million respectively. This is largely due to the construction division's pre-tax loss of RM11.6 million in 1Q2010. However, a strong recovery in 2Q2010 to RM19.8 million was heartening, as the losses from the Yemen oil and gas jetty were fully accounted for in 1Q2010. Asia Petroleum Hub remains a concern given that more than RM200 million of Muhibbah's receivables are from that project.
However, its shipyard and concessions divisions contributed strongly with year-on-year (y-o-y) increases of 142% and 50% respectively.
Y-o-y, 1H2010 net profit was 45% lower due to 9% lower turnover and 130% higher interest expenses. The write-down in losses from the Yemen oil and gas jetty was accounted for only from 3Q2009 to 1Q2010. One-off interest expense was recognised in 2Q2010.
Quarter-on-quarter, 2Q2010 net profit doubled to RM10.8 million given the absence of write-downs in losses from the Yemen oil and gas jetty project. Besides construction, shipyard and crane turned in strong performances in 2Q2010 with 27% and 90% increases.
The outlook is bright, provided Muhibbah can collect its receivables from Asian Petroleum Hub, otherwise provisions will have to be made for doubtful debts. Muhibbah has RM2.53 billion order book remaining as at June 30, made up of RM1.6 billion in infrastructure, RM450 million in cranes and RM484 million in ships. It continues to be active in bidding for projects and just won a RM124.4 million contract to construct an offshore marine centre in Tuas, Singapore.
We have lowered our FY2010 and FY2011 net profit by 17% and 11% to RM46 million and RM52.1 million respectively, factoring in slower recognition of profit from the Asia Petroleum Hub project.
Maintain 'buy' with a target price of RM1.35 (previously RM1.80) using a sum-of-parts RNAV. Re-rating catalyst for the stock is the payment of its outstanding receivables. The stock is trading at a low PER of eight times and seven times for FY2010 and FY2011. ' Kenanga IB Research, Sept 3
This article appeared in The Edge Financial Daily, September 6 2010.
Company Name: MUHIBBAH ENGINEERING (M) BHD
Research House: KENANGA
Muhibbah Engineering Bhd
(Sept 3, 90 sen)
Maintain buy at 88.5 sen with lower target price of RM1.35 (from RM1.80): Muhibbah's 1H2010 net profit of RM16.1 million was below expectations at 29% and 28% of our forecast of RM55.6 million and RM56.5 million respectively. This is largely due to the construction division's pre-tax loss of RM11.6 million in 1Q2010. However, a strong recovery in 2Q2010 to RM19.8 million was heartening, as the losses from the Yemen oil and gas jetty were fully accounted for in 1Q2010. Asia Petroleum Hub remains a concern given that more than RM200 million of Muhibbah's receivables are from that project.
However, its shipyard and concessions divisions contributed strongly with year-on-year (y-o-y) increases of 142% and 50% respectively.
Y-o-y, 1H2010 net profit was 45% lower due to 9% lower turnover and 130% higher interest expenses. The write-down in losses from the Yemen oil and gas jetty was accounted for only from 3Q2009 to 1Q2010. One-off interest expense was recognised in 2Q2010.
Quarter-on-quarter, 2Q2010 net profit doubled to RM10.8 million given the absence of write-downs in losses from the Yemen oil and gas jetty project. Besides construction, shipyard and crane turned in strong performances in 2Q2010 with 27% and 90% increases.
The outlook is bright, provided Muhibbah can collect its receivables from Asian Petroleum Hub, otherwise provisions will have to be made for doubtful debts. Muhibbah has RM2.53 billion order book remaining as at June 30, made up of RM1.6 billion in infrastructure, RM450 million in cranes and RM484 million in ships. It continues to be active in bidding for projects and just won a RM124.4 million contract to construct an offshore marine centre in Tuas, Singapore.
We have lowered our FY2010 and FY2011 net profit by 17% and 11% to RM46 million and RM52.1 million respectively, factoring in slower recognition of profit from the Asia Petroleum Hub project.
Maintain 'buy' with a target price of RM1.35 (previously RM1.80) using a sum-of-parts RNAV. Re-rating catalyst for the stock is the payment of its outstanding receivables. The stock is trading at a low PER of eight times and seven times for FY2010 and FY2011. ' Kenanga IB Research, Sept 3
This article appeared in The Edge Financial Daily, September 6 2010.
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