CIMB Research maintains Muhibbah Engineering target price at RM3.05

by **hlk** Thu 09 Jan 2014, 12:47

KUALA LUMPUR: CIMB Equities is maintaining Muhibbah Engineering’s target price at RM3.05.

It said on Thursday Muhibbah is likely to emerge as one of the key plays on private sector-driven jobs, which is one of the main themes for the construction sector in 2014.

The other main driver is the Economic Transformation Programme (ETP). For Muhibbah, oil & gas and port/marine-related jobs are the primary drivers of order book growth.

“Its tender book stands at RM4bil to RM5bil and is mainly oil & gas infra-related. The overall outlook continues to be positive for all divisions (infrastructure, cranes and shipyard),” it said.

CIMB Research said Muhibbah’s share price re-rated in 2012 following the announcement that the group had won a steel fabrication licence from Petronas but has been rangebound ever since. The next kicker could be securing its maiden fabrication job.

Muhibbah’s outstanding order book stands at RM2.1bil, including Favelle Favco's (cranes) all-time high of RM1bil.

Shipyard orders are set to surpass the high in 2009, driven by the pick-up in domestic chartering contracts for oil & gas.

The group is vying for an oil & gas infra project in Cambodia, with a potential share of works worth RM300mil to RM400mil.

The group has a good chance of participating in the construction of refinery and regasification plants in Sabah and Johor if the projects are implemented.

CIMB Research said there were also opportunities in Petronas's Rapid project in Iskandar are intact. Decisions on tenders are likely to pick up from March 2014 onwards while RM300mil to RM400mil worth of maiden steel fabrication contracts arising from the fabrication licence from Petronas are likely to materialise this year.

The research house said the group will tender for the subcontract packages of the West Coast Expressway (WCE).

“Turnaround in order flows in 2014. We were encouraged by management's optimism. The positive surprise was the potential oil & gas infra project in Cambodia. The group has a good chance given its track record domestically and overseas,” it said.