Construction firm trying to clinch more projects in Malaysia
Muhibbah Engineering (M) Bhd is hoping to clinch more construction jobs in Myanmar and Indonesia as it scours the region for opportunities in the economic downturn.
“Myanmar and Indonesia are good markets so we are paying a lot of attention to them. As for the former, we are still waiting out the political situation so as to give them time to stabilise,” its managing director and co-founder Mac Ngan Boon told the media at the sidelines of the Cambodia international airports’ new terminal extension launch ceremony on Wednesday.
The engineering and construction services company won in 1995 a concession with French construction player Vinci to build and operate Phnom Penh International Airport and Siem Reap International Airport.
Muhibbah Engineering signed an additional 20-year concession to continue to develop the two airports as well as a third one, the Sihanoukville International Airport, which was added to the deal in recent years.
Muhibbah Engineering had a 21% stake in the joint venture, Vinci, 70%, while the balance 9% was held by a local entity.
“The aviation business is a gateway into a new country. We roll out a lot of promotions for the government to attract tourists. We usually see a lot of results within six months,” Ngan said.
“Cambodia is experiencing tremendous growth in its economy, about 7%. We are riding on that growth, while working with their government to roll out initiatives to draw tourists into the country,” Muhibbah Engineering group finance director Shirleen Lee said.
Siem Reap and Phnom Penh airports had doubled their capacity to 12 million passengers, collectively.
Passenger arrivals grew 13% to 6.5 million passengers for the financial year 2015.
According to AllianceDBS Research, Muhibbah Engineering’s 21% stake in the Cambodia airport concession was estimated to be worth RM677mil with a 5% annual increase in passenger traffic until 2040.
“Revenues are also in US dollar, which is a boost to earnings given the weak ringgit,” the research house said, giving the stock a “buy” call with a target price of RM2.90 for its diversified business.
“The Cambodian airports are a significant contribution to the group, however, the bulk of our construction business is driven by infrastructure projects in Malaysia,” Lee said.
Muhibbah Engineering has a market capitalisation of RM1.1bil with an orderbook worth more than RM2.6bil excluding its Cambodian airports business..
“We are trying to clinch more projects in the construction industry in Malaysia, where it is now most buoyant. Twenty years ago, there weren’t such sizeable mega projects,” Lee said. “The RM2.3bil can last us the next two to three years.”
“Globally, the construction business is still very slow so we are trying to maintain our turnover and growth from last year. Our priority for now is to maintain our deliverables,” Ngan said.
Speaking on the reduction of capital expenditure (capex) in Petronas, Ngan said: “Everyone would be affected by that. But our advantage is the group’s diversity. As such, we will continue to pick up more downstream work to mitigate against the cost-cutting in the upstream sector.”
Meanwhile, foreign exchange loss in the weakening of the ringgit would not carve a significant dent in Muhibbah Engineering’s financial statements.
“Naturally in a company like ours, we would either gain or lose in the ordinary course of business. Our job is to attain contracts and tie those contracts to their respective bids and rates. We do not speculate as we are not forex traders,” he said.