KUALA LUMPUR: Affin Hwang Capital research is projecting a turnaround for Malaysia Marine Heavy Engineering Bhd despite larger-than-expected headline losses of RM123mil in FY18.
"We lower our FY19-20E profit forecasts to adjust for the lower revenue and margins for the marine segment (from 18% to 16%), though we believe earnings would likely turnaround as the Bokor CPP has achieved the threshold to start profit recognition at 36.7% completion, and outstanding variation orders on RAPID jobs should give a boost to earnings," it said in a research note today.
It added that the order book as of December 2018 was lower at RM826m.
The research house said the group's performance was owing to its marine segment incurring deeper losses due to a series of cost provisions.
Core losses in FY18, after stripping out the one-off impairment charge was RM8mil, which was an improved performance due to the better heavy engineering segment on the back of higher recognition from ongoing projects.
"Nevertheless, the continuous deferment in client dry-docking activities and lack of high margin jobs impacted results, which saw marine revenue falling by 56% and losses widening to RM33m (from 3Q18 losses of RM16m)," said Affin Hwang.
It lowered its target price to 61 sen while maintaining a hold call, cautioning also that the Kasawari CPP project for which MMHE is reported as a frontrunner continues to face delay.
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