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Monday, June 27, 2011

Muhibah - Some light relief (CIMB)

After the APH travails, last Friday’s award of the RM338m Northport extension contract to Muhibbah was a slight welcome surprise and an indication of the group’s strength and niche in port/marine related infrastructure works. Contributions from this project will amount to 5-9% of FY11-13 net profit. However, we make no changes to our numbers as it is part of the RM1bn new contracts that we have assumed for 2011. Although APH’s receivership remains an overhang, we maintain our TRADING BUY call and target price of RM2.75, which we continue to base on a 10% RNAV discount. This award, a likely positive outcome for APH and more contract wins are potential catalysts for the stock which has collapsed 27% since the APH news made headlines.

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