KUALA LUMPUR (March 31): MIDF Research has upgraded Muhibbah Engineering Bhd to “Buy” at RM1,10 with a higher target price of RM1.22 (from 76 sen) after rolling its valuation base year to FY22 and said Muhibbah’s 4QFY20 results narrowed its losses to RM27.5 million as compared to net loss RM69.4 million in 4QFY19.
In a note today, the research house said that cumulatively, Muhibbah’s FY20 results remained loss-making at RM81.5 million, within house but below consensus expectations.
“Construction work pace and traffic at its airport concession to gradually improve which in turn drive earnings recovery.
“Healthy order book at about RM967.0 million could provide earnings visibility over the next 2-3 years,” it said.
MIDF said it is of the view that the outlook of Muhibbah’s 21%-owned Cambodia Airports, which predominantly constitute up to 70% of the group’s earnings, is set to be on gradual recovery over the next 2 years on the back of accelerated Covid-19 vaccination drive across the globe especially China, US, South East Asia, etc.
“We are revising upward our earnings estimates for FY21 and FY22 to RM47.8 million and RM68.6 million respectively.
“This is premised on our assumption of higher earnings contribution from its airport concession business and a recovery of its construction segment on higher progress billings amidst a quicker-than-expected roll-out of the Covid-19 vaccination programme across the key countries such as China, US, Cambodia and South East Asia,” it said.
