MMHE faces risk of lower order book replenishment

KUALA LUMPUR: It may be time for investors to lock in their gains following the 32% surge in the share price of Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) over the past one month.

Affin Hwang Capital research downgraded the stock to a hold on valuation grounds as its market capitalisation has since risen above its net cash value, although net cash still makes up 75% of the market cap. The research house kept its target price of 45 sen on the stock.

For the present, the research house is anticipating the risk of a slower roll-out of new contracts due to the prolonged low oil price environment and a potential capex cut by Petronas, which could lead to lower order book replenishment.

Petronas’ Activity Outlook had previously projected that the number of wellhead platform structures to be rolled out would increase from five to nine units in 2019 to 10 to 13 units in 2020.

However, Affin Hwang noted that MMHE's order book of RM3bil should allow it to be self-sustaioning for the next three to four years.

The group's marine segment is also expected to support earnings although Affin Hwang forecasts a 7% decline in revenue in 2020 as global demand weakens, before rebounding to 13% growth in 2021.

"The new dry dock 3, which will increase its current capacity by 68%, is targeted to be completed and commissioned by 3Q20, and would allow MMHE to cater to larger vessels," said Affin Hwang.
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 0
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

Next In Business News

Global shares slide as interest-rate risk rises and geopolitics heat up
US CBP's modification of forced labour finding on SDP is credit positive: Moody’s
Thai baht faces worst day in 23 years as strong dollar pressures Asia FX
Dell to cut about 6,650 jobs, battered by plunging PC sales
Indonesia to suspend some palm oil export permits - officials
Oil prices edge higher as IEA's Birol talks up China demand outlook
Indonesia 2022 GDP growth races to 9-year high on resource boom
Foreign investors' latest targets in China
Asia shares skid, dollar gains as yields spike
CIMB cautious on net interest margin for this year

Others Also Read