Sunday, June 19, 2011

Muhibbah shares rebound but investors wary

Muhibbah shares rebound but investors wary
By Goh Thean Eu
Published: 2011/06/18

KUALA LUMPUR: Shares of Muhibbah Engineering (M) Bhd rebounded by more than 5 per cent yesterday but most investors are likely to sit on the sidelines before jumping onto the firm's bandwagon, analysts said.

Muhibbah's shares closed 5.26 per cent higher at RM1.60 from RM1.52 on Thursday, after it told Bursa Malaysia that there are "reasonable grounds" that receivables for the work done on a petroleum hub and bunkering facility could be recovered.

Its subsidiary, Favalle Favco Bhd, also rebounded, rising 12 sen, or 7.45 per cent, to RM1.73.

On Thursday, the company's shares fell 20 per cent after reports that its major client, Asia Petroleum Hub Sdn Bhd (APH), was in receivership.

Muhibbah said that APH is now in talks with an unidentified investor to fully finance the project, including making due payments to contractors. APH owes Muhibbah about RM370 million.

Analysts felt the rebound may most likely be a knee-jerk reaction, as the statement does not fully address investors' concern.

"I don't think the announcement can fully address investors' concern. More information needs to be revealed," Jupiter Securities head of research Pong Teng Siew said when contacted.

"This is one of the few things about construction companies that I am worried about. First, the capabilities of getting contracts. Then, when one gets the contract, it doesn't mean the job can be completed. Even if the job is completed, it doesn't mean money can be collected," he added.

Analysts added that even if a new investor comes into the picture, Muhibbah may take a hit on its bottomline due to the provisions, as the new investor may take time to settle the due payments.

Muhibbah was awarded a RM820 million contract to undertake marine piling and jetty works for APH. However, rising cost due to APH funding issues led to the stalling of payments due to Muhibbah.

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