PETALING JAYA: Engineering and construction group Muhibbah Engineering (M) Bhd
is expected to see near-term earnings support from its latest acquisition, although analysts remain cautious pending the consolidation of the exercise.
Muhibbah, through its 64%-owned unit Favelle Favco Bhd (Favco), entered the industrial waste and recycling equipment market with the acquisition of France-based Seram Industries SAS.
Favco has agreed to acquire a 100% stake in Seram for up to 10mil or about RM47mil, comprising an upfront payment of 7.5mil and a deferred 2.5mil that is tied to specific conditions under the sales and purchase agreement.
The acquisition is expected to be completed by Jan 31.
CIMB Research said: “With full control of Seram, Muhibbah gains immediate entry into the niche industrial waste and recycling equipment sectors, where automation and energy efficiency are increasingly critical.”
Seram specialises in the design, manufacturing, installation, training, servicing, and maintenance of lifting cranes and electric conveyors for industrial waste management plants.
The value proposition is further enhanced by Seram’s patented hydraulic balancing crane system, automated material handling technologies, and engineering expertise, positioning the group in a niche segment.
Based on Seram’s audited net profit for 2024 (FY24) of RM8.7mil, CIMB Research estimates the implied acquisition price-earnings ratio at 5.5 times.
The research house said the transaction is “earnings per share accretive for Favco”, with pro forma FY24 earnings per share projected to rise 14% to 26.2 sen, from 23 sen previously.
The Seram acquisition follows Muhibbah’s recent contract win for offshore wellhead platform work under PETRONAS Carigali Sdn Bhd’s Sepat Integrated Redevelopment project, which was awarded by PETRONAS Carigali on Dec 18, and targeted for completion by the first quarter of 2029.
CIMB Research said the Sepat offshore oil and gas development project lifted Muhibbah’s construction order book by between 3.4 and 3.9 times, to between RM994mil and RM1.1bil.
The research house maintained its “hold” call on Muhibbah, with an unchanged target price of 54 sen, citing the need to monitor the completion of the acquisition and integration of Seram into the group.
