KUCHING: Malaysia Marine and Heavy Engineering Bhd (MMHE) has a substantial tenderbook worth RM5 billion moving forward despite the lacklustre results shown in its financial performance in the first half of financial year 2012 ending December (1HFY12).
The net profit of RM133.6 million for the first six months of the year were below consensus expectations at only 38 per cent of RM347.3 million, brought about mainly by the lower-than-expected margin from the offshore division.
With regards to the second quarter of FY12 (2QFY12), Kenanga Investment Bank Bhd (Kenanga Invesment) stated in a research report, “Quarter-on-quarter (q-o-q), despite a 45 per cent increase in revenue (RM965.7 million), the net profit (RM55.3 million) was down by 29 per cent, mainly due to lower-than-expected operating margins in the offshore division and the high-base effect of excess margins recognised for projects like Tapis and Teluk that started to contribute to profits in 1QFY12.
OSK Research Sdn Bhd (OSK Research) opined in a concurrent research note, “We believe the company had continued to underperform due to the lack of new and high margin contracts from Petronas and its Production Sharing Contract (PSC) contractors.
“Its second quarter (2Q) FY12 revenue surged 45.2 per cent quarter-on-quarter (q-oq) to RM965.7 million owing to stronger revenue arising from ongoing progress at the FSU Lekas contract and the securing of more LNG (liquefied natural gas) vessel repair works.”
HwangDBS Vickers Research Sdn Bhd (HwangDBS Research) in a separate report stated, “MMHE has streamlined its yard optimisation programme to expand its yard capacity to 180,000 metric tonnes (mt) by 2017 from 130,000mt currently, for which it has committed circa RM2 billion capital expenditure.
“Its balance sheet remained healthy with RM1.3 billion net cash. Its RM2.8 billion order book (as at June 2012) includes the circa RM800 million Kebabangan project.
“The management shared that tender book remained healthy at RM5 billion, including the anticipated Malikai contract (advanced stage) which MMHE has a fair chance of securing via its joint venture with Technip.”
HwangDBS Research revised its target price to RM4.90 per share, based on 22 times FY13 earnings per share (EPS) after rolling over the valuation base to FY13.
Meanwhile, Kenanga Investment’s target price was reduced to RM4.22 per share, based on 18 times targeted price earnings ratio (PER) on its revised 2013 EPS of 23.4 sen.
OSK Research’s fair value for the company was adjusted to RM5.32 per share after factoring an earnings downgrade and rolling its valuation forward to a FY13 EPS, based on a PER of 23 times.