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Wednesday, March 27, 2013

Hwang DBS starts Muhibbah with 'buy'


Hwang DBS Vickers Research started coverage of civil engineering company Muhibbah Engineering (M) Berhad with a 'buy' rating and a target price of RM2.15 per share, citing bright earnings prospects due to its niche position in the market.

Muhibbah’s spread of businesses, which includes crane manufacturing, ship building and civil construction projects, differentiates it from the average contractor, giving it a scarcity premium, Hwang DBS said in a note on Wednesday.

"Muhibbah’s niche strengths in marine infrastructure and construction leave it nicely poised to win additional contracts in both the booming domestic oil and gas industry as well as abroad," Hwang DBS said.

The research house said based on the group’s recent share prices, its earnings in the financial years of 2013-2014 could see a net yield growth between 4 and 5 per cent.

"Moving forward, we are anticipating at least a 20 per cent net profit payout, based on its historical distribution record, coupled with better forward earnings," Hwang DBS added.

The research house said Muhibbah could give the Asia Petroleum Hub — one of the largest petroleum storage projects in the region — a "new lease of life" in a recovery plan that could be revealed after the general elections.

"If this happens, we expect possible writebacks of RM405 million (RM1 per share), further boosting our forecasts."

As of 11.18am, shares in Muhibbah were up 0.85 per cent against the benchmark stock index’s 0.88 per cent gain.-- Reuters

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