KUALA LUMPUR (June 11): AllianceDBS Research has downgraded Muhibbah Engineering Bhd to Hold (from Buy) at RM3.01 with an unchanged target price of RM3.20 and said Muhibbah’s orderbook had depleted to RM1.9 billion, implying a thin cover of 1x FY13 revenue.
In a note Wednesday, the research house said job wins had been slow year-to-date (YTD) with RM91 million for construction, RM186 million for cranes, and nil for its shipyard.
“Its initial target of RM1 billion new construction jobs could be an uphill task this year, so it has issued a lower guidance of RM500 million-RM600 million,” said AllianceDBS Research.
The research house said it cut FY14/15 earnings for Muhibbah by 33% after factoring its slow orderbook replenishment.
Alliance DBS Research said Muhibbah’s FY14 earnings were now projected to decline by 13% due to the timing gap between running down its existing orderbook and expected new job wins.
“Our target price is unchanged at RM3.20, pegged to 15x FY15F PE (previously used SOP metric), but we downgrade the stock to Hold (from Buy) because the share price has risen recently.
“Positive news flow on RAPID may be dampened by expectations of weaker earnings in subsequent quarters,” it said.
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