KUALA LUMPUR (Jan 19): KAF Research maintained a “buy” rating on Muhibbah Engineering (M) Bhd with an unchanged target price (TP) of 86 sen, representing a 30% discount compared to the net asset value (NAV), following a recent contract win by its unit Favelle Favco Bhd.

Muhibbah Engineering’s 64%-unit Favelle Favco recently secured new manufacturing orders worth RM79 million for its cranes, comprising one unit of offshore crane and tower crane each, as well as machinery replacement orders. 

The offshore crane will be scheduled and delivered to Servizi Energia Italia, while the tower crane will go to Resolution Rigging Services by the middle and end of this year, it stated. 

Meanwhile, the machinery replacement orders will be delivered to three separate clients, namely E&P O&M Services Sdn Bhd, Petron Malaysia Refining & Marketing Bhd, and Petronas Carigali Sdn Bhd, the research house said in a note Friday.

Taken together, the above-mentioned orders represent Favelle Favco’s first major wins for the year, the research house added.

KAF Research also remains sanguine about Favelle Favco’s prospects for its crane manufacturing business, as both oil and gas (O&G) and renewable energy (RE) activities pick up.

For the nine months ended Sept 30, 2023 (9M2023), the research house estimated that Favelle Favco’s cumulative new orders had surged close to 60% higher year-on-year to nearly touch RM400 million. 

It added that the crane manufacturer’s tender book had swelled to RM1.4 billion, along with an increasing number of enquiries for its cranes, including approximately RM200 million worth of bids by Exact Automation. 

Looking forward, KAF Research said Muhibbah Engineering’s earnings visibility is locked in, at least for the next two years, together with a pickup in infrastructure orders.

At the time of writing on Friday, Muhibbah Engineering was traded down one sen or 1.27% to 78 sen, translating into a market capitalisation of RM 564.08 million. Favelle Favco gained seven sen or 3.9% at RM1.88, valuing the company at some RM441 million.