CIMB Securities maintains ‘Hold’ on Muhibbah Engineering, lowers target price

KUALA LUMPUR: CIMB Securities Sdn Bhd has cut its core profit forecasts for Muhibbah Engineering (M) Bhd for financial years 2026 to 2028 (FY26-FY28), after the company’s first-quarter (Q1 2026) earnings came in below expectations.

The firm also lowered its target price for Muhibbah Engineering to 50 sen from 54 sen previously, following the earnings revisions, but maintained its “Hold” call.

Muhibbah Engineering’s top line and core profit fell 27 per cent and 56 per cent year-on-year to RM234 million and RM8 million respectively, tracking only 11 per cent of CIMB Securities’ full-year forecast and 14 per cent of consensus estimates.

The firm said the weaker performance was mainly due to lower contributions from the cranes and automation division under its 65 per cent-owned Favelle Favco, as well as reduced project billings.

“Given the Q1 earnings miss, we cut our FY26-FY28 core profit forecasts by 30 per cent, 25 per cent and 22 per cent to RM49 million, RM55 million and RM65 million, respectively.

“Our earnings downgrades account for higher building materials and logistics costs and a 19 to 25 per cent cut in our new construction order book assumptions for FY26-FY28 to RM300 million, RM450 million and RM650 million, respectively,” it said.

CIMB Securities said it estimated that every RM100 million increase in new infrastructure wins per annum across FY26-FY28 would boost Muhibbah Engineering’s core profit by about five to eight per cent.

Nevertheless, the firm expects Muhibbah Engineering’s earnings to improve over the remaining three quarters of FY26, supported by the gradual recognition of billings from the Sepat Integrated Redevelopment Project, valued at an estimated RM700 million to RM850 million.

This is also expected to be underpinned by a ramp-up in work flows for the Cranes and Automation division following the seasonal slowdown in the first quarter.

“Additionally, Muhibbah Engineering recently secured a RM91 million crane supply contract in Australia. As expected, Muhibbah did not declare any dividends in Q1,” it said.

CIMB Securities expects Muhibbah Engineering’s near-term share price performance to remain capped due to limited visibility on infrastructure bid rollouts and a more challenging outlook for Cambodia Airports.

It added that major tender flows for oil and gas-related works are likely to stay muted, pending the resolution of protracted negotiations between Petroliam Nasional Bhd and Petroleum Sarawak Bhd.

“Nevertheless, Muhibbah’s current valuations are supported by attractive FY26-FY28 dividend yields of 4.8 per cent to 6.7 per cent,” it said.

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المصدر: New Straits Times