I dont need to be either type to articulate facts, and while stereotyping seems effortless, it undermines one's ability to objectively seeking truth.

Since mid of 2020, both EPF and Lembaga Tabung Haji have ceased to be significant investor of Muhibbah, and ever since then it has not announced any of their subsequent purchase of its share, indicating their shareholdings are lower but not higher than those of prior to that cessation, a revelation that whether they have gradually reduced their positions to extremely immaterial level will come to light end of this month.

*Ceased to be significant shareholder = the company is no longer obliged to report investor's buy or sell transactions because that investor holds immaterial level of position. It does not imply that such investor remains holding the shares. Just as Muhibbah does not report your transactions, it also stop to report those of EPF and LTH.

Managing Luxembourg funds rated 6 out of 7 in risk, FIL's fund managers are expected to include miracle elements in their portfolios. However, justifying such share acquisition as indication of "good buy for long term", "safe", and "sure things" is rather naive.

Posting RM123 million loss in 2020, of which only about 10% is non-recurring cost due to restructuring, indicates on-going construction projects are generally running in negative margin, completing them further only yields similar margins, a notion of construction profit recognition. Without new, positive margin project, the company is expected to further announce huge red for construction segment that has balance of RM500 million worth of negatively margined orders.

The company will make profit only if its crane and airport contribute significant profits to offset loss making construction. Given the slower than expected rollout and bottlenecked supply of covid-19 vaccines, it is unlikely to see airport industry to triumph in 2021.

But the most crucial question of all is that with all these circumstances, how Muhibbah repay a billion ringgit debts due in 12 months?

While GDP of every countries that Muhibbah operates has shrunk in 2020, Muhibbah's fixed assets surged 10% in the same year. Such accounting treatment is definitely warrant scrutinization, or perhaps Muhibbah is really as amazing as "is very good stock, indeed".

Key takeaways of Muhibbah's 2020 reporting can be summarized as continued financial deterioration and accounting manipulation.

My analysis on the company's liquidity and going concern has not changed, and the latest financial report only further confirm its financial deteriorations: greater financial loss, RM123 million, diminished a quarter of its retained earnings; remained highly indebted with debts due in 12 months; total debt remains about the same as total debt in last year and the company only managed to refinance 12% of last year short term debt to long term debt, indicating extremely weak financial strength in repaying debt; and most importantly its declining order book is now lower than its already low 2020 revenue, decreased by 23% to 2019's.

In an attempt to present better looking financial reporting, the management significantly misrepresented until 4Q 2020 the company financial position in the past by omitting RM115 million PPE revaluation.

In its annual report, the company accounting policy stated that "The Group and the Company adopted the policy to revalue their freehold land and leasehold land every 5 years < or > at shorter intervals whenever the fair values of the freehold land and leasehold land are expected to differ materially from their carrying values". In 2020, a year when coronavirus pandemic affected almost every economics in the world, including property market, Muhibbah's assets somehow magically surged by RM115 million.

There are only three reasons to why such revaluation only disclosed in 2020 but not earlier. Firstly, the company revalued and was aware, but chose not to disclose in the past and to use it as a tool to adjust the book when required. Secondly, the company simply cooked things up. Lastly, the management is incompetent for genuinely omitted it in the past. In any case, it speaks volume about integrities of its management and financial reporting.

Scrutinizing its financial report under such perspective, I also identified another key takeaway for its 2020 performance. In 2020, Muhibbah accounted only 10% of 2019 dividend income from associates, confirming my prediction that SCA will not be saviour to Muhibbah in resolving its financial hardships and raising doubt about recoverability of hundreds million of profit from SCA, accounted in long term receivables.

Wise investor would have realised by now that half of Muhibbah cash is contributed by Favelle Favco, half of declining order book of Muhibbah is contributed by FF, almost all of Muhibbah's debt is not related to FF, and FF is the main profit making operation in Muhibbah. If one think that Muhibbah management team is the best in the world, a belief that I strongly doubt, then one needs to ask why invest in Muhibbah but not FF itself, especially when Muhibbah, which declared no dividend in 2020, will this time use all of FF dividend for itself than route it to its own shareholders.

https://simplywall.st/stocks/my/capital-goods/klse-muhibah/muhibbah-engineering-m-bhd-shares/news/is-muhibbah-engineering-m-bhd-klsemuhibah-weighed-on-by-its

I’m here to give an opinion. Just as someone said how strong its payout ratio is but the fact that my whole point is on its 12 months solvency, analysing its current assets, current liability and cashflow, including the 20 million dividend it will receive from Favelle Favco but only paying 11 million to its own shareholder.

The mentioned payout ratio by the someone is referred to dividend receivable from SCA that is recorded as long term asset under investment in associate, that explained it materialise only 51% in 20 years. However, I did touch on it to highlight its unlikelihood of materialising much in coming 12 months given the reasons mentioned above.

The ability of converting receivables, example M&G’s, into cash and the plausibility profit recognition, of which contract assets and contract liability, are the key doubts on its current assets, suggesting weaker force than indisputable 1 billion debt due in 12 months, in turn, driving into deep current liability.

4 possibilities in serving the debt are highlighted but none is convincing:
1) more debt via bank acceptance but limited order book or via loan but unlikely given heavy debt and pandemic.
2) new project then finance via bank acceptance, but unlikely given pandemic
3) IR/Bond, unlikely as large investors such as KWSP and Tabung Haji have left.
4) return from operations, extremely unlikely given its nov dividend is at discount 45% of crane dividend, suggesting that airport and construction are in negative return and thus that its contract asset and liability, exclude crane, are subject to scrutiny.
4a) dividend from SCA, unlikely because pandemic and new airports by Chinese. Besides, it is a long term asset that materialise slowly throughout 20 years, unlikely resolving the immediate 1 billion debt due in 12 months, given being minority so unable to exert influence on dividend policy such that to release all remaining retained profit.

A wise man should ask the right question. There is no need to question my credential and identity as it does not has any bearing to your wealth, question the facts presented. Be smart.

a wise individual would recognise an effect on balance, in which both positive and negative; both debit and credit, before drawing into conclusion.

What I have demonstrated was that there is reasonably weaker force in the current assets than current liability, a solid, indisputable1 billion debts due to banks.
The weaker current assets consist of only 350 million cash after removing falleve favco’s and of some accruals, paper profit, that are based purely on management’s discretion, accruals that in several cases failed to convert into cash. That would drawing its financial into deep current liabilities, in turn, could result inability of serving the 1 billion debt due in 12 months.

One can continue to brag about single force, without considering into both forces into equilibrium, or worse justify past performance, such as payout ratio, as future’s guarantee.

I am here to show the full pictures to everyone, it’s up to the readers to judge whether they want to invest their hard earned money into Muhibbah, which, in my opinion, has severe going concern doubt, and at least not only judging based on a one-sided, skewed opinion.

Current assets that cannot translate into cash, except cash itself, are merely temporary losses parking in balance sheet, inflated by paper profits through accrual and implausible profit recognition. The management has proven to be incompetent in converting receivables, derived from paper profits, into cash in several cases, including M&G’s. That has always been my focus, unless you are not paying attention just as you do on your blunt analysis.

No one is questioning the management’s ability of expanding its business, after all what is required for expansion is primarily money, raised by equity, or debt such as the 1 billion currently sitting on Muhibbah balance sheet.

Rest assured that no reasonable retail investor will touch this counter until it resolves its severe insolvency doubt, just as KWSP and Tabung Haji have disposed its shares at heavy losses.

How could a right issue resolves a 1 billion debt due in 12 months when its market cap is valued at only 380 million? Unless it raise 3 times of its market cap, then its own management, mac’s family and executives, whose own about 25% of total shareholding needs to come out with 280 million from their personal pockets to avoid their shares’ dilution.

Of course 3 times is an extreme measure assuming no other source of fund. Anyway, when everyone in the management knows the company is going under, convincing them to go deeper with extra personal capital is simply impossible.

Anyone familiar with right issue or any other issue including bond knows that most, if not all, of issues are sold to big investors before they are offered to the public, perhaps left less than 10% of raised capital. In this particular case that Muhibbah’s substantial investors, excluding management, such as KWSP and Tabung Haji have disposed their shareholding since May 2020, so it is unlikely to expect any other big investor to fill the gap, even if the management team members are willing to dilute their own shares by not pouring personal capital into a sinking ship.

One does not need to post several to proof his credential, quality of work prevails quantity’s.
@uptrending. may be you should just focus on its recent dividend distribution and seek for truth at the easier ground, given your intellect‘s limitation to understand complexed analysis: Why when it will receive 20 million from Favelle Favco in November but only pay its own dividend for 11 million?

That implied ordinary Favelle Favco shareholder is better off by owning only its crane subsidiary, instead of owning the parental company, Muhibbah, which diluted Favelle Favco’s return at 45% for losses in airport and construction.

That explained Favelle Favco’s share has rebounded but not Muhibbah’s. Your reverse logic, which saying worth of its subsidiary and SCA is not reflected in that of parental is an opportunity is simply ignorance to the fact that the Market has valued Muhibbah as almost negative for its heavy debt, is completely flawed.

SCA like any other airports in the World is suffering from pandemic and will face intense competition from new Chinese-owned Cambodian Airports, so it is unlikely for SCA to pay any dividend to shareholders in coming years.
Moreover, Muhibbah being minority shareholder, even with 30%, in SCA is unable to exert influence on SCA’s dividend policy. It is obvious when it needs to pay 40-50 million interest annually for years because of its heavy debt, but leaving the so called 400 million with SCA for decades for 0 interest. That raised the questions of management’s competency in converting paper profit into cash and plausibility of its revenue recognition, perhaps yet another accounting scandal to be unveiled.

Muhibbah is going under. one should look at its cashflow and pause to rely on past paper profits. After all, assuming past is an indicator of future is similar to farm chickens expecting to be feed every morning.

Starting with debt payable by this year, within 12 months, the total is 1.1 billion, included bills payable. those who say it is cash rich should check how much cash it left after removing favelle favco’s portion, left less than 350 million.

It has a practice of rolling over its bill payables, a credit card alike bank facility in layman’s term, with realisation of order book. However, its order book now, excluded that of favelle favco, is less than 700million. If it would manage to exhaust all of its order book in 12 months and banks would willing to finance the heavily debt-ridden company, then, combined with its cash, it has just enough to pay the coming short-term debts, before dividend and other operating expenditures.

The easier way to understand this is to look at the dividend it will receive from favelle favco in November, rm20 million, 60% of total favelle favco dividend, but it will only pay its own for 11million, suggesting that it pockets the difference to finance its ongoing difficulties and that other business segments, airports and construction, are in negative cashflow.

Therefore, those on paper profits with SCA that have been retained for decades are failed to translate into hard currency, even in critical time, raising questions of its management’s effectiveness in converting receivables into cash.

One recent apparent failure is when it failed to collect receivables of a ship it built from M&G, and thus translating the sum into acquisition of the ship’s share.
A simple analogy would be a developer still let a purchaser to buy a newly built customised-house after purchaser failed to secure full loan from bank, in turn, the developer will own certain percentage of the house for the failed payment. That strongly suggests a failed management in planning and execution.

With construction of new cambodian airports by chinese and lack of success in profitable constrcution’s bidding, its prospect is dim. However, the biggest concern now is its going-concern, unless it manages to get new loan amid of pandemic crisis to stay afloat or new project, last announced was more than 12 months, to finance its cashflow with bills payables.

Knowledgable analysts such as those of kwsp and tabung haji have dumped most of their holdings, ceased to be substantial investors since May. those holding for hoping its share price would rebound should consider their chance of profiting is higher on casino’s table.