MMHE to benefit from upcoming EPCIC contract award

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KUCHING: Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) could be a potential beneficiaries of the upcoming engineering, procurement, construction, installation and commissioning (EPCIC) contract award from the Baronia central processing platform (CPP) located offshore Miri.

The research division of Affin Investment Bank Bhd (Affin Research) in a report said MMHE is poised to benefit from the upcoming CPP jobs.

This is due to the company’s strengths such as having a strong technical partner with world leading engineering oil and gas company, Technip S.A, which is one of the four local contractors under Petroliam Nasional Bhd’s (Petronas) five-year design and engineering contract, good execution track record and its modern yards which is strategically located.

In particular, the research firm observed that MMHE’s yard is less than 60 per cent utilised which provides more capacity for the company to undertake more jobs in the range of two to three new CPP projects.

On another note, Affin Research noted that Petronas had on April 3 approved the Final Investment Decision (FID) for the development of the Pengerang Integrated Complex (PIC) in Johor which consists of a Refinery and Petrochemicals Integrated Development (RAPID) with other associated facilities estimated to cost a total of US$27 billion.

Therefore, Affin Research believed that MMHE could also obtain some oil and gas jobs from that development given the strategic location of its fabrication yard in Pasir Gudang, Johor.

Furthermore, the research firm said some of the potential pipeline projects to be awarded include an EPCIC contract for the Bergading field, offshore Peninsular Malaysia, the Sepat gas processing project located offshore Terengganu and the Kasawari gas project offshore Sarawak.

In the meantime, the research firm observed that the business prospects of MMHE could improve in the second half of 2014 (2H14) as Petronas could announce the award of some oil and gas contracts towards the second half of the year.

Giving the improving business prospects, Affin Research has raised the earnings forecast of MMHE for financial year 2015 (FY15) and FY16 on expectations of stronger contracts flows in 2H14 and 1H15.

Hence, Affin Research is bullish on MMHE prospects due to its strong focus in the offshore fabrication business and its partnership with one of the world leading oil and gas players, Technip to undertake large scale fabrication projects.