Stock Name: MHB
Company Name: MALAYSIA MARINE AND HEAVY ENG
Research House: MAYBANK
Malaysia Marine and Heavy Engineering Holdings Bhd
(May 9, RM6.77)
Maintain hold at RM6.83 with target price of RM6.50: Results (ex-anomalies) were in line. 12MFY11 net profit of RM451 million was up a strong 61% year-on-year (y-o-y). The Cendor Phase 2 floating production storage and offloading (FPSO) conversion job win has surpassed our expectation in terms of value, while upcoming potential sizeable job wins (RM2 billion to RM4 billion) should boost its order book. We believe, news flow could momentarily stretch price performance beyond 28 times 2012 price-earnings ratio (sector peak), above our fundamental target price of RM6.50 (22 times earnings per share). We maintain our 'hold' call.
Results in 4Q were skewed by anomalies. MMHE declared a final dividend per share (DPS) of five sen. Revenue of RM923 million (-30% quarter-on-quarter) in 4QFY11and RM129 million net profit (-4% q-o-q) took full-year net profit to RM451 million (+61% y-o-y), ahead of our and street forecasts of RM382 million and RM403 million respectively. The outperformance in 4Q was on: (i) RM39 million tax credit from Investment Tax Allowance (ITA); (ii) RM65 million variation orders (VO) at MMHE-TPGM; and (iii) unrelated order book contributions. Excluding these, results would be in line.
Group revenue fell 30% q-o-q on the de-consolidation of MMHE-TPGM results (for the Turkmenistan project) from Jan 1, 2011. The Gumusut-Kakap (RM191 million revenue contribution), Kinabalu (RM78 million) and Tangga-Barat projects were the drivers to E&C revenue, which accounted for 96% of the group's top line. Complementary division, marine repair and conversion revenue contracted (-16% q-o-q to RM39 million), reflecting the slowdown in the shipping sector.
MMHE has clinched the RM850 million FPSO conversion job for the Petrofac Cendor Phase 2. While the contract value is above our anticipated RM500 million to RM600 million, this is insufficient to offset its job run rate which was down to RM3.1 billion as at March 2011 (-13% q-o-q). Seventy-three per cent of three existing orders (Gumusut-Kakap, Turkmenistan, Kinabalu) will be exhausted by 2Q12, within a year. This is likely to be replaced with highly probable domestic contracts with combined values of RM2.2 billion to RM4.3 billion. This excludes potential new orders from Turkmenistan and Iraq projects. ' Maybank IB Research, May 9
This article appeared in The Edge Financial Daily, May 10, 2011.
Company Name: MALAYSIA MARINE AND HEAVY ENG
Research House: MAYBANK
Malaysia Marine and Heavy Engineering Holdings Bhd
(May 9, RM6.77)
Maintain hold at RM6.83 with target price of RM6.50: Results (ex-anomalies) were in line. 12MFY11 net profit of RM451 million was up a strong 61% year-on-year (y-o-y). The Cendor Phase 2 floating production storage and offloading (FPSO) conversion job win has surpassed our expectation in terms of value, while upcoming potential sizeable job wins (RM2 billion to RM4 billion) should boost its order book. We believe, news flow could momentarily stretch price performance beyond 28 times 2012 price-earnings ratio (sector peak), above our fundamental target price of RM6.50 (22 times earnings per share). We maintain our 'hold' call.
Results in 4Q were skewed by anomalies. MMHE declared a final dividend per share (DPS) of five sen. Revenue of RM923 million (-30% quarter-on-quarter) in 4QFY11and RM129 million net profit (-4% q-o-q) took full-year net profit to RM451 million (+61% y-o-y), ahead of our and street forecasts of RM382 million and RM403 million respectively. The outperformance in 4Q was on: (i) RM39 million tax credit from Investment Tax Allowance (ITA); (ii) RM65 million variation orders (VO) at MMHE-TPGM; and (iii) unrelated order book contributions. Excluding these, results would be in line.
Group revenue fell 30% q-o-q on the de-consolidation of MMHE-TPGM results (for the Turkmenistan project) from Jan 1, 2011. The Gumusut-Kakap (RM191 million revenue contribution), Kinabalu (RM78 million) and Tangga-Barat projects were the drivers to E&C revenue, which accounted for 96% of the group's top line. Complementary division, marine repair and conversion revenue contracted (-16% q-o-q to RM39 million), reflecting the slowdown in the shipping sector.
MMHE has clinched the RM850 million FPSO conversion job for the Petrofac Cendor Phase 2. While the contract value is above our anticipated RM500 million to RM600 million, this is insufficient to offset its job run rate which was down to RM3.1 billion as at March 2011 (-13% q-o-q). Seventy-three per cent of three existing orders (Gumusut-Kakap, Turkmenistan, Kinabalu) will be exhausted by 2Q12, within a year. This is likely to be replaced with highly probable domestic contracts with combined values of RM2.2 billion to RM4.3 billion. This excludes potential new orders from Turkmenistan and Iraq projects. ' Maybank IB Research, May 9
This article appeared in The Edge Financial Daily, May 10, 2011.
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