KUALA LUMPUR (Jan 8): CIMB Investment Bank Bhd said Muhibbah Engineering Bhd's prospects for 2016 could be better, backed by its RM6 billion tender book.
In a note today, CIMB analyst Sharizan Rosely said Muhibbah's contract wins of RM1.1 billion in 2015 had exceeded the research firm's and consensus’ targets of RM500 million to RM800 million.
"The latest guidance from management is for 2016 to be another bullish year for Muhibbah’s infra segment. Domestic jobs make up 100% of its tender book that is mainly focused on downstream refinery and petrochemical-related infra.
“Just a 20% success rate translates to RM1.2 billion in potential wins for Muhibbah in 2016, higher than our assumption of RM800 million,” he said.
CIMB maintained its “add” call on Muhibbah shares, with an unchanged target price of RM3.22.
At 12:30pm, the stock gained four sen or 1.8% to settle at RM2.28, for a market capitalisation of RM1.07 billion. A total of 571,100 shares were traded.
Sharizan said Muhibbah is expected to clinch more orders, as Petroliam Nasional Bhd (Petronas) shifts its capital expenditure to the oil and gas downstream sector.
He said Muhibbah was shaping up to be a big beneficiary of Petronas’ move to shift its capex to downstream activities via the Refinery and Petrochemical Integrated Development (Rapid) project in Johor.
“We believe Muhibbah is well ahead of other existing contractors there,” he said.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)