It wants to ride on pump-priming efforts in public sector
PETALING JAYA: Muhibbah Engineering (M) Bhd will focus on tendering for Government infrastructure projects amid a cautious outlook for the group this year, says group financial controller Shirleen Lee.

Lee said there were still many opportunities available in the sector due to pump-priming efforts by the Government.

In view of the current economic uncertainty, government-linked projects were also less riskier in terms of payment, she added.

“Although we will continue with our efforts to secure more jobs locally, we will be more selective on which overseas market to penetrate in view of the political and economic risks,” Lee told StarBiz.

She added that to date, the company did not face any trouble obtaining financing for its projects.

Going forward, Muhibbah would be cautious and factor in price variations of construction materials when tendering for projects, she said.

As at Feb 18, Muhibbah’s order book stood at RM4.21bil, of which 64% or RM2.7bil comprised infrastructure projects.

The order book is expected to keep the construction and engineering firm busy until 2013.

Earlier this month, Muhibbah announced that it had been awarded a RM109mil contract for the Central Oil Distribution Terminal project at Tanjung Manis in Mukah, Sarawak.

The contract was awarded by Assar Chemical Dua Sdn Bhd, which is part of the Assar Senari Group, a government-linked company involved in the oil, gas and chemicals business.

Muhibbah said work at the project was scheduled to start this month and would be completed by the third quarter of 2010.

ECM Libra, in its latest report, said it was positive on the new job secured as it would boost Muhibbah’s outstanding orderbook to RM4.3bil.

“However, based on an assumed pre-tax margin of 5%, the impact on its earnings in FY09 and FY10 is minimal at about 3%,” the report said.

For the financial year ended Dec 31, 2008 (FY08), Muhibbah’s net profit fell to RM21.8mil from RM70.2mil in FY07 due to losses at its infrastructure construction division, although revenue rose to RM2.1bil from RM1.4bil.

Lee conceded that 2008 was a challenging year for the company due to the drastic surge in oil price as well as high construction material prices.

“Our transport costs, especially, shot up due to the spike in crude oil prices,” she said.

Muhibbah’s share price had fallen by more than 80% to 73 sen yesterday from its high of RM4.20 last year.

Lee attributed the heavy selldown to the company’s high level of foreign shareholdings, which had since been reduced to 19% from 38% in January 2008.