KUALA LUMPUR (March 31): MIDF Research has upgraded Muhibbah Engineering (M) Bhd to “buy” at RM1.10 with a higher target price (TP) of RM1.22 (from 76 sen) after rolling its valuation base year to the financial year ending Dec 31, 2022 (FY22) and said Muhibbah’s fourth quarter ended Dec 31, 2020 (4QFY20) results narrowed its losses to RM27.5 million as compared to a net loss RM69.4 million for 4QFY19.

In a note today, the research house said that cumulatively, Muhibbah’s FY20 results remained loss-making at RM81.5 million, within the house but below consensus expectations.

“The construction work pace and traffic at its airport concession will gradually improve, which in turn will drive an earnings recovery.

“Its healthy order book at about RM967 million could provide earnings visibility over the next two to three years,” it said.

MIDF said it is of the view that the outlook of Muhibbah’s 21%-owned Cambodia Airports, which predominantly contributes up to 70% of the group’s earnings, is set to be on a gradual recovery over the next two years on the back of an accelerated Covid-19 vaccination drive across the globe, especially in China, the US, Southeast Asia and so on.

“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 a higher earnings contribution from its airport concession business and a recovery of its construction segment on higher progress billings amid a quicker-than-expected roll-out of the Covid-19 vaccination programme across key countries, such as in China, the US, Cambodia and Southeast Asia,” it said.