MUHIBBAH Engineering (M) Bhd’s earnings prospects will be more visible after the group secures an offshore facilities construction and major onshore fabrication licence from Petroliam Nasional Bhd (Petronas), Kenanga Research says.
News of the award of the licence helped push Muhibbah’s share price 11 per cent higher to RM1.74 yesterday.
It was one of the most actively traded stocks with 20.4 million shares changing hands.
Muhibbah announced on Thursday that it had obtained the licence from Petronas to become an approved supplier for offshore facilities construction and major onshore fabrication works.
The licence qualifies Muhibbah to tender and participate for any offshore construction and onshore fabrication related works for Petronas or other oil major operators in Malaysia.
A quick check shows that KKB Engineering Bhd’s associate company Oceanmight Sdn Bhd, MISC Bhd and Petronas Carigali Sdn Bhd are some of the other licensees.
“This means Muhibbah was able to tender on its own instead of a tie-up with other oil and gas players with a licence,” Kenanga Research analyst Iqbal Zainal said in a telephone conversation.
“Even if it is not Petronas’ jobs, you are trusted by other oil and gas players. Muhibbah will be viewed as a proxy of local oil and gas fabricators,” he added.
The research firm believes that there will be a better earnings visibility for Muhibbah.
“It could ride on the RM300 billion capital expenditure by Petronas to boost the local oil and gas sector,” Iqbal said.
Given that it has a good track record with Petronas, where it is currently completing for RM1.1 billion liquefied natural gas (LNG) regasification project in Malacca, the company is expected to win more Petronas projects including the Refinery and Petrochemicals Integrated Development (Rapid) complex in Pengerang, Johor.
It was learnt that the RM60 billion Rapid development will be split into 20 packages and Muhibbah is qualified to bid for at least three packages.
Each package may be worth RM600 million to RM1 billion.
“With the Petronas licence, it further strengthens Muhibbah’s chance of securing at least one package,” the research house said.
Muhibbah’s order book stands at RM2.24 billion with 45 per cent of it coming from the oil and gas sector.
Kenanga Research has reiterated its “outperform” rating on the stock and raised its target price to RM1.90 from RM1.63.