PETALING JAYA: Muhibbah Engineering (M) Bhd is expected to benefit from a tourism recovery in Cambodia, analysts say.
The company owns a 21% effective stake in Cambodia Airports which manages two operating airports in Cambodia.
It is also likely to clinch more Petroliam Nasional Bhd (PETRONAS) jobs via its PETRONAS fabrication licence, CGS International Research (CGSI Research) said in a report.
“We hosted a meeting with Muhibbah’s management on Sept 12 and in our view, the key takeaway is possible large lumpy wins after a lull,” the research house said.
It noted Muhibbah’s order book for construction and cranes remained resilient at RM1.6bil as of Aug 24, albeit down from its recent Nov 23 peak of RM2.4bil.
“It has yet to win any material contracts this year but has submitted a large tender for an engineering, procurement, construction and commissioning role for the Lang Lebah gas field in Sarawak.
“Given its prior experience with similar projects in Gansar, Bekok and Bindu in Terengganu, we see it being a frontrunner for this project,” the research house said.
CGSI Research said that passenger arrivals at the two Cambodian airports rose 18% year-on-year (y-o-y) to 2.3 million in the first half of 2024 (1H24), and should hit five million for the entire year.
The research house added that Cambodia Airports accounted for most of Muhibbah’s 1H24 associate profits, which rose 63% y-o-y to RM30mil.
“This is commendable as 1H23 included the Siam Reap airport concession. “
Citing The Khmer Times, the research house said the construction of Techno International Airport in Kandal, near Phnom Penh was 80% complete and will open in mid-2025, replacing the current Phnom Penh airport.
“We maintain our view that the most likely scenario involves Cambodia Airports receiving compensation for investment incurred until the Phnom Penh airport concession is surrendered and that it will be engaged to operate the new airport at Kandal, based on a fixed-fee structure and with some element of profit sharing,” the research house said.
While it said it liked Muhibbah for its cheap valuation at next year’s financial year price-earnings ratio of eight times versus the sector’s 17 times, it noted key downside risks were the non-continuity in earnings delivery and higher raw material costs.
Re-rating catalysts for the company include better earnings delivery and stronger tourist arrivals in Cambodia, the research house said.
