PETALING JAYA: With the reopening of the economy, Muhibbah Engineering Bhd’s operational performance is expected to improve in the financial year 2022 (FY22).

       However, analysts are still cautious on the group’s post-pandemic recovery given the spread of the Omicron variant across the globe.

       They noted that passenger arrivals in the three international airports in Cambodia, of which the group has an effective stake of 21%, remained substantially below pre-pandemic levels. This could mean continued associate losses in FY22, according to CGS-CIMB Research.

       Domestically, the research firm said Muhibbah Engineering may have little room to accelerate the growth of its infrastructure order book to pre-Covid-19 levels.

       “It appears that the quickest route is for inorganic growth (via merger and acquisition), which is one of the main objectives of its recently announced one-for-two rights issue,” said the research firm in a report following a post FY21 results briefing with management.

       However, it added that there is still lack of clarity on the potential targets or parameters, “though the group generally hinted that preference will be in the manufacturing sector”.

       The group’s rights issue would raise RM129mil. The exercise is pending an EGM approval on March 7.

       On its Cambodian operations, there is a recovery window for its airports in FY22, underpinned by the lifting of foreign travel bans from mid-November last year, according to CGS-CIMB.

       “The group indicated that despite the pandemic, Cambodia Airports was still earnings before interest, taxes, depreciation, and amortisation positive in FY’21, while the losses were mainly due to high depreciation.

       “Associate losses are likely in the first half of 2022, with a possibility of minimal profit in the second half,” the research said, adding that the risk of further losses in FY’22 is plausible, given low passenger numbers.

       Notwithstanding the near-term challenges, MIDF Research came away from the briefing with “a tinge of optimism”, especially on its medium to long-term prospects.

       It said that management had guided that it would be selective with its replenishment targets for the construction segment such as for projects in the oil and gas sector, in which it has a niche. It will also aim for projects with better margins of about 10% rather than going for volume.

       The group’s construction order book has completion timelines of up to 2024.

       Among projects being tendered by Muhibbah Engineering are Petroliam Nasional Bhd’s offshore platform contracts, which are currently at advanced stages.

       “While management declined to reveal further details, we posit that it could be at least two jobs with a total contract value of about RM500mil,” said MIDF.

       It is also eyeing to tender for potential expansion jobs in Westports Holdings Bhd, which could be in the range of RM100mil per package, albeit lower margins of 5% to 6%, it added. For FY21, Muhibbah Engineering remained in the red with a core net loss of RM8.88mil, although this was an improvement of 94% year-on-year.