Monday 15 August 2011

MUHIBBAH (Stock code: 5703)

Industry: Construction

MUHIBBAH (Stock code: 5703)

News of the lifting of Asia Petroleum Hub Sdn Bhd’s (APH) receivership may have contributed to the rise in Muhibbah Engineering Bhd’s share price, making it one of the top 10 gainers on Bursa Malaysia last week. Muhibbah is one of APH’s major non-bank creditors. APH and its bankers had reached an understanding, resulting in Datuk Gan Ah Tee of BDO Binder being discharged as receiver and manager amid talk of new investors emerging to revive the company.

This development should be welcomed by Muhibbah’s shareholders and could trigger a re-rating of the stock, which has slumped nearly 40% in the past two months and is down 22% year-to-date. The stock is trading at a forward price-earnings ratio of 7.3 times, according to Bloomberg consensus estimates. In mid-June, news reports that APH had been placed under receivership sent Muhibbah’s shares tumbling 32 sen to RM1.52 from RM1.90 in a single day. Investors were understandably concerned whether Muhibbah would be able to collect RM371 million owed by to it by APH. The current stock market rout further sent the stock spiralling to a low of RM1.07 on Monday, a loss of 43.6% in less than two months.
(The Edge Financial Daily, August 10, 2011)

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