PETALING JAYA: Muhibbah Engineering (M) Bhd’s earnings for the first quarter of financial year 2020 were below analysts’ expectations as net profit plunged 85% year-on-year (y-o-y) to RM5.1mil.
This was on the back of weaker passenger receipts from Muhibbah’s Cambodia airports from the prolonged impact of Covid-19 and lower contributions from the crane segment due to the movement control order (MCO).
CGS-CIMB said Muhibbah’s second quarter earnings could be even weaker, given the risk of the group’s infrastructure division slipping into losses due to almost zero billings for its domestic order book in the second quarter of the year.
In addition, the decline in passenger numbers may be larger in the second quarter as the Covid-19 pandemic worsened globally during that period.
“The impact of Covid-19 was most severe on the group’s 21%-owned Cambodia Airports, as the pandemic started affecting travel patterns much earlier in the first quarter of 2020.
“The 68% y-o-y fall in associate earnings, apart from the weaker contribution from road maintenance works, was mainly due to a 42% y-o-y drop in passenger numbers for all three of its airports to 1.9 million at the end of the first quarter with China tourists making up the highest proportion, ” said CGS-CIMB in a research report.
Construction activities are expected to gradually resume in the second half of the year.
As of March, the outstanding orderbook stood at RM1.3bil, providing one to two years of earnings visibility.
Going forward, RHB Research believes Muhibbah’s business should recover in FY21, backed by better earnings on an improving operating landscape and returning travel demand as passenger arrivals should likely approach closer to normal levels upon the containment of Covid-19.
Did you find this article insightful?
100% readers found this article insightful