PETALING JAYA: Malaysia Marine & Heavy Engineering Holdings Bhd
(MMHE) is bidding for RM7bil to RM8bil of contracts with about one-third of those bids being for overseas jobs.
About one-third of the tender book is for non-oil and gas (O&G) projects.
Its order book has been adjusted to RM6.2bil, from RM5.7bil quarter-on-quarter (q-o-q), said UOB Kay Hian (UOBKH) Research.
MMHE’s latest order book includes the recently secured sub-contract from Petrofac for an engineering, procurement, construction and commissioning or EPCC of the second offshore substation high voltage direct current platform for the Nedewiek 1 project.
For the first half of financial year 2024 (1H24), MMHE’s revenue grew 21% year-on-year (y-o-y) while earnings surged six-fold with 1H24 core earnings at RM56mil.
RHB Research remains optimistic about MMHE’s outlook as the group transitions from older projects to new ones on more favourable terms while also demonstrating resilience in the marine segment.
Due to that, several research houses have revised their forward earnings for MMHE higher.
RHB Research said it revised its financial year 2024 (FY24) earnings for MMHE to RM88mil from RM38mil to account for the cost recovery claims.
It also revised upwards its FY25-FY26 earnings forecast by 8.1% and 9.8% on better margins.
MIDF Research revised its earnings forecast for the group’s FY24 upward by 186%.
UOBKH Research upgraded its 2024-25 forecast on MMHE from losses to RM70mil/RM35mil profit, and 2026 earnings by 167%.
RHB Research has a “buy’’ call on the stock with a target price (TP) of 61 sen a share based on MMHE’s robust order book – signalling a strong sector outlook.
MIDF Research has maintained its “buy’’ call with a TP of 65 sen a share, pegged to a price earnings ratio (PER) of eight times to earnings per share of 8.2 sen in FY25.
It said the new PER is based on the O&G Construction Services PER, in which it believes is more precise in reflecting the recovery in MMHE’s heavy engineering and marine businesses moving forward.
This is in line with the sanguine outlook on the regional and local upstream O&G sector, amid the uncertainties in the geopolitical and economic front.
UOBKH Research has retained its “buy’’ call on MMHE with a higher TP of 70 sen (60 sen earlier) a share.
However, it noted there may be a risk once the Petroliam Nasional Bhd Fabrication Frame Agreement with five yard players is up for renewal in 2025.
Its price-to-book ratio valuation is still undemanding versus peers, ie, Seatrium (0.8 times), Hyundai Heavy (3.5 times) and Samsung Heavy (2.4 times).
The research house sees value in MMHE’s transformation story.
This is as it enabled the yard operator to continue to benefit from sustainable profit recovery (for marine), and environmental, social and governance or ESG decarbonisation opportunities.
