Muhibbah’s annualised 1Q11 core net profit was 18% above our forecast and 13% above consensus, courtesy of lower-thanexpected tax rates. Another surprise was the timing of the announcement of a RM101m contract for the Gorgon project, which came earlier than expected. We up our F11-13 EPS forecasts by 12-13%, which also factor in RM1.5bn worth of new jobs instead of our previous assumption of RM1bn. This raises our target price from RM2.60 to RM2.75, pegged to an unchanged 10% discount to RNAV. We maintain our TRADING BUY call. Potential re-rating catalysts include (i) this results outperformance, (ii) a favourable outcome for the APH project, and (iii) contract awards.
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