News Muhibbah announced that Asia Petroleum Hub Sdn
Bhd (APH) had been wound up on 19
October 2012 and the Court had appointed an Official Receiver as a provisional
liquidator of APH.
Comments We are
neutral on the news as we are unsure of the amount to be recovered from the
liquidation process. However, the move above is expected to address the creditors’
interest in the next 21 days, which include the debt to share swap exercise.
The management sees this news as positive as it will speed up the decision-making
to solve the overhang issue in APH.
As at 1H12, the
amount due from APH amounted up to RM400m for the work done duly certified, of
which Muhibbah had already made a RM160m provision in the past years. Going
forward, the recoverable amount is still too early to be estimated.
Nonetheless, we think that the liquidation will somewhat be speeded up.
To recap, Muhibbah
had previously proposed the debt to equity swap as part of the settlement of
the outstanding amount. We do not discount that the liquidator will revisit
this debt to equity swap settlement with the creditors.
Outlook Notwithstanding, the company’s going concern remains
not in doubt and its long term prospect remains intact underpinned by its
ongoing projects, which is worth about RM2.2b (order book) lasting up to the
next 3 years.
Forecast We are maintaining our numbers at this
juncture pending further development on this news i.e. the possible write-off
of the remaining outstanding amount due from APH.
Rating Maintain
MARKET PERFORM
There is a slight
positive on this news but the uncertainty on the recoverable amount remains an issue.
We expect the share price to react positively on the conclusion of the APH
liquidation outcome later.
Valuation We
have increased our Target Price on Muhibbah to RM0.925 from 0.83 as we are lowering the rate of the write-off
on the RM395m receivables due from APH to 50% from 60% previously.
Risks Delays in project execution and a spike in
building material prices.
Source: Kenanga
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