PETALING JAYA: Muhibbah Engineering (M) Bhd’s recent contract wins will improve investor sentiment towards the construction and engineering counter.

       However, a sustainable rerating of the company’s stock will depend on the execution of the jobs in hand, said CGS-CIMB Research.

       The brokerage reiterated its “add” call on Muhibbah, with an unchanged sum-of-parts-based target price of 90 sen.

       This followed Muhibbah Engineering clinching two contracts on Monday totalling RM479mil, encompassing an extension of a contract from Petroliam Nasional Bhd and the Lumut maritime terminal expansion.

       “While Muhibbah’s contract flows have been encouraging, we believe the sustainable rerating of its stock price hinges on the execution and delivery of its projects within the budgeted costs and their impact on its earnings,” CGS-CIMB Research said in its report yesterday.

       It noted that with the latest contracts, Muhibbah’s year-to-date (y-t-d) wins for construction would amount to RM652mil, bringing its total construction order book to RM1.6bil as at November 2023.

       CGS-CIMB Research’s current forecast assumed about RM480mil total new wins for Muhibbah’s construction segment for 2023.

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       The company’s y-t-d wins had already exceeded the brokerage’s forecast.

       Muhibbah had guided for earnings before interest, tax, depreciation and amortisation margin of 7% to 8% for the two projects.