We came away from our Corporate Day event feeling even more positive on Muhibbah’s prospects. Although its share price has risen 14% since the beginning of the year, we see ample upside as newsflow is likely to pick up in the coming months, driven by the anticipated resolution of the APH project. This, as well as contract awards for 10MP and ETP projects, is the key premise for our TRADING BUY call.
Given the buoyant outlook, we raise our RNAV-based target price from RM2.06 to RM2.20 as we now (i) tag a higher P/E of 14.5x instead of 13.8x to its shipyard division, (ii) factor in Favelle Favco’s higher market cap, and (iii) reduce our RNAV discount from 20% to 10%. Potential share price catalysts include contract awards and a favourable outcome for APH.
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