PETALING JAYA: Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) could see a much-needed earnings push this year on the back of sizeable job wins.
Maybank Investment Bank Research (Maybank IB) said in a report yesterday that securing big wins in 2019 would be a major earnings catalyst for the company.
“Capitalising on Petronas’ higher workflow (based on its activity outlook for 2019) and breakthrough from Saudi Aramco’s Long Term Offshore Agreement (LTOA) for offshore EPCIC works would spur this.
“While MMHE is touted to be in the lead for the multi-bilion MYR Kasawari CPP and Limbayong FPSO conversion works in Malaysia, the LTOA would single-handedly offer MMHE an exposure to a US$3bil (RM12bil) per annum tender opportunity, a new avenue of growth beyond the local market,” said the report.
As such, the research house said it remains positive on MMHE.
“It is undervalued (0.5-times net tangible assets) with strong financial footing (net cash). MMHE has proven to have steadfastly withstood the cyclical downturn, emerging resilient,” according to the report.
Maybank IB said order backlog, margins, order replenishment and operating expenditure are MMHE’s key earnings drivers.
“Current order backlog of RM800mil offers a 10-month visibility with razor-thin earnings before interest and taxes margin. Tenders pipeline is on the rise, MMHE remains net cash and as such, room for bank and bond financing is abundant.”
MMHE is Malaysia’s largest and most sophisticated offshore fabrication operator engaged in engineering and construction and marine repair and conversion works.