Maybank Investment maintains buy rating on MMHE

KUALA LUMPUR: Maybank Investment Research remains positive on the cyclical recovery in the heavy engineering segment while noting that a sizeable job win would be a re-rating catalyst for Malaysia Marine Heavy Engineering Bhd amid bottoming valuations.

In its Wednesday report, the research house said it does not rule out MMHE making a provision for the claim of US$21.7mil by EA Technique Bhd over a dispute on invoices and additional work orders (AWO) for a contract to demolish, refurbish and convert an FSO. 

In a filing with the stock exchange yesterday, MMHE had said it will defend the claim, make counter claims for the AWOs and the costs incurred from this, and reserve the right to pursue any other legal actions.

"That said, sub-par financials by MMHE for this FY is well flagged. From an operational perspective, we believe the worst is over for MMHE. Its cash/ cost management is in order and tender pipeline is on the rise. "

Maybank Investment added that disputes such as this are not uncommon. 

"We continue to see values in MMHE. Valuations are undemanding and at the trough, from a P/BV perspective. Regional peers have re-rated. MMHE remains a laggard," it added.

The research house maintained its buy rating on the counter with a target price of RM1.47.