KUALA LUMPUR: Rakuten Trade Sdn Bhd has boosted Muhibbah Engineering (M) Sdn Bhd's earnings per share (EPS) for fiscal years 2024 and 2025 (FY24/FY25), marking increases of 41 per cent and 43 per cent respectively.
This surge follows Muhibbah Engineering's remarkable performance, surpassing its expected net profit for fiscal year 2023 (FY23) by an impressive margin of 141 per cent.
"In the fourth quarter of FY23 (4QFY23), Muhibbah achieved a core net profit of RM45 million, contributing to a full-year core net profit of RM53 million, inclusive of its associate's contributions.
"This performance was attributed to improved divisions such as Marine Shipyard, Cranes, and Intelligent Automation, along with a better-than-expected recovery in Cambodian tourist traffic," it said in a note today.
The firm expects Muhibbah to secure more contracts due to Petronas' heightened capital expenditure and transportation infrastructure projects like the Penang LRT, which require noise barrier systems.
"This enhances Muhibbah's earnings predictability as it enters a phase of increased profitability," it added.
Additionally, Rakuten Trade said the engineering company stands to gain from the rapid earnings rebound of its associates through its airports in Cambodia as tourist traffic steadily recovers.
"In the 4QFY23, Cambodia's airport passenger levels reached 40 per cent of the pre-pandemic levels in the same period of fiscal year 2019 (FY19).
"We anticipate further recovery in passenger traffic, especially with the expected increase in Chinese tourists.
"It is worth noting that in FY23, passenger numbers from China only accounted for approximately 41 per cent of the levels seen in FY19.
The firm continued that it has been suggested that Cambodian airports have raised passenger service and aeronautical charges by at least 20 per cent since October 2023.
"This increase partly offsets the loss of revenue and profit contribution from Siam Reap airport after the compensation exercise.
Consequently, it said the combination of these positive factors is expected to drive earnings from its associates to unprecedented levels in FY24 and beyond.
Rakuten Trade has suggested a 'buy' rating for the engineering company, setting a raised target price of RM1.14.