KUALA LUMPUR: Muhibbah Engineering (M) Bhd (MEB) still has much room for securing jobs as the outstanding order book has yet to return to pre-pandemic levels, which were usually RM1.5bil to RM2bil, according to MIDF Research.
The research house said MEB’s latest RM322mil contract from Petronas Carigali Sdn Bhd brings the group’s current outstanding order book to RM1.29bil, with earnings visibility up to FY24.
MEB via a consortium, has accepted a RM322mil project award from Petronas Carigali Sdn Bhd related to the Gansar Project, 190 kilometres offshore Terengganu.
MEB is the lead partner for the consortium that won the project.
“While no details of the consortium were disclosed, we assume MEB’s stake to be 60%, therefore adding RM193.2mil to the group’s order book.
“At a reasonable profit margin of about 5%, this contributes about RM9.7mil to the group throughout the period,” MIDF said.
The research house is maintaining its target price of 47 sen as it pegs a projected forward PER of 7x to the group’s FY23 EPS of 6.76 sen.
“We are downgrading our recommendation on MEB from ‘buy’ to ‘neutral’, considering the recent run-up in share price.
“MEB has been affected by weaker margins in recent quarters, similar to many other construction players, due to elevated costs related to building material costs and foreign labour, but this will of course improve gradually in quarters to come.
“We believe FY23 would be a good time for MEB to capture the potential increase in job flows, especially in the oil and gas space,” MIDF said.
MEB added 2.5 sen, or 5.49% to 48 sen at 9.55am. It has appreciated 17.07% in the past one month.