Stock Name: MHB
Company Name: MALAYSIA MARINE AND HEAVY ENG
Research House: ECMLIBRA
Malaysia Marine and Heavy Engineering Holdings Bhd
(Feb 7, RM6.10)
Maintain hold at RM6.06 with target price RM5.81: Last week, it was announced that Technip together with Daewoo Shipbuilding & Marine Engineering won a FEED (front-end engineering and design) contract for Petronas' floating liquefied natural gas (FLNG) vessel. The FEED contract for the one million tonnes per annum (mtpa) unit is due for completion by 2HCY11. Technip will likely team up with MMHE for the hull design and with Daewoo for the topside, industry sources said.
Besides that, MMHE is participating in a tender for the Block B-17 Muda-Jengka gas project in the Malaysia-Thailand JDA. Carigali-PTTEP Operating Company (CPOC) has invited yards to qualify for a contract to build three platforms. Formal tender documents are expected to be issued in 2QCY11 Potential contenders include, Kencana Petroleum, Sime Darby, MMHE, Thai Nippon Steel and Cuel.
News on the FLNG is positive as it will beef up the group's marine segment (where they provide vessel conversion and repair services) order book, which at the moment continues to be rather slow at less than RM30 million of jobs on a month to month basis. Another job that is due for the marine segment is the conversion of two tankers from MISC to become floating storage units (FSU's) that will serve the Petronas regasification project. On the platform job for B-17, we view that MMHE does have some capacity to take on small shallow water jobs in 2HCY11 as its Tangga Barat Topside job (14,505-tonnes) has recently been completed and it will complete the similar-sized Kinabalu topside by 1QCY12. Total annual tonnage of MMHE is 69,700 tonnes, and the Gemusut-Kakap FPS takes up 38,000mtpa. We estimate current available yard capacity at 17,000mtpa which could be a sizeable shallow water job worth up to RM800 million. To note, MMHE is also bidding for a platform job in Iraq and another gas compressor job in Thailand.
We view that replenishment of jobs such as the ones mentioned above have been captured into our estimates. More importantly, our concerns on order book replenishment are somewhat eased, given the active bidding activity by the group. Timing of job awards remains the only variable and it will be crucial that jobs in Turkmenistan are replenished on time (2QCY11) and the Malikai TLP also awarded on time (3/4QCY11).
MMHE currently trades at only 4.4% above our RM5.81 target price (TP) and we maintain our hold call for now citing that good news has been factored in. The only wildcard will be on merger and acquisition activity that may come into fruition in 2QCY11 but we will be writing separately on that. To note, our TP of RM5.81 is based on a P/E multiple of 20 times pegging CY11 EPS of 29 sen. ' ECM Libra Investment Research, Feb 7
This article appeared in The Edge Financial Daily, February 8, 2011.
Company Name: MALAYSIA MARINE AND HEAVY ENG
Research House: ECMLIBRA
Malaysia Marine and Heavy Engineering Holdings Bhd
(Feb 7, RM6.10)
Maintain hold at RM6.06 with target price RM5.81: Last week, it was announced that Technip together with Daewoo Shipbuilding & Marine Engineering won a FEED (front-end engineering and design) contract for Petronas' floating liquefied natural gas (FLNG) vessel. The FEED contract for the one million tonnes per annum (mtpa) unit is due for completion by 2HCY11. Technip will likely team up with MMHE for the hull design and with Daewoo for the topside, industry sources said.
Besides that, MMHE is participating in a tender for the Block B-17 Muda-Jengka gas project in the Malaysia-Thailand JDA. Carigali-PTTEP Operating Company (CPOC) has invited yards to qualify for a contract to build three platforms. Formal tender documents are expected to be issued in 2QCY11 Potential contenders include, Kencana Petroleum, Sime Darby, MMHE, Thai Nippon Steel and Cuel.
News on the FLNG is positive as it will beef up the group's marine segment (where they provide vessel conversion and repair services) order book, which at the moment continues to be rather slow at less than RM30 million of jobs on a month to month basis. Another job that is due for the marine segment is the conversion of two tankers from MISC to become floating storage units (FSU's) that will serve the Petronas regasification project. On the platform job for B-17, we view that MMHE does have some capacity to take on small shallow water jobs in 2HCY11 as its Tangga Barat Topside job (14,505-tonnes) has recently been completed and it will complete the similar-sized Kinabalu topside by 1QCY12. Total annual tonnage of MMHE is 69,700 tonnes, and the Gemusut-Kakap FPS takes up 38,000mtpa. We estimate current available yard capacity at 17,000mtpa which could be a sizeable shallow water job worth up to RM800 million. To note, MMHE is also bidding for a platform job in Iraq and another gas compressor job in Thailand.
We view that replenishment of jobs such as the ones mentioned above have been captured into our estimates. More importantly, our concerns on order book replenishment are somewhat eased, given the active bidding activity by the group. Timing of job awards remains the only variable and it will be crucial that jobs in Turkmenistan are replenished on time (2QCY11) and the Malikai TLP also awarded on time (3/4QCY11).
MMHE currently trades at only 4.4% above our RM5.81 target price (TP) and we maintain our hold call for now citing that good news has been factored in. The only wildcard will be on merger and acquisition activity that may come into fruition in 2QCY11 but we will be writing separately on that. To note, our TP of RM5.81 is based on a P/E multiple of 20 times pegging CY11 EPS of 29 sen. ' ECM Libra Investment Research, Feb 7
This article appeared in The Edge Financial Daily, February 8, 2011.
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