MHB (5186) - Malaysia Marine & Heavy Eng - Order book at its lightest
Target RM1.20 (Stock Rating: REDUCE)
Delays and provisions at its yard made FY14 the weakest year for MMHE since its listing. Net profit tumbled 45% to RM130m, missing expectations as it formed only 85% of our forecast and 81% of consensus. Adding to the worry is the company's dry spell, which resulted in the order book shrinking to a record low of RM1.6bn as at Dec 2014. We continue to value the stock at 15x CY16 P/E, on par with our target market P/E. We maintain our Reduce call, with the potential de-rating catalyst of longer project delays. Switch to SapuraKencana, our top pick among the oil & gas big caps.
Record low annual net profit
4Q14 net profit slumped 84% yoy to RM17m, mostly due to 1) delays and provisions for sizeable projects that include Cendor, and 2) the absence of substantial profit contributions from the Malikai and SK316 projects. EBIT margin deteriorated from 5.8% in FY13 to 2.7% in FY14. Consequently, FY14 net profit tumbled 45% yoy to RM130m, a new all-time low. We had expected a full-year DPS of 6 sen, but the company did not declare any.
Although we are disappointed with MMHE’s performance, we maintain our forecasts as Malikai and SK316 are expected to start contributing significantly in 2H15. Furthermore, we anticipate the order book momentum to pick up as new CEO Abu Fitri Abdul Jalil takes over the reins on 1 Mar. Abu Fitri joined Petronas in 1991 and has held various senior positions.
Order book challenge
Order book replenishment is critical for MMHE, which ended FY14 with an all-time low order book of RM1.6bn (Figure 1). Management had expected to secure RM1.5bn worth of new projects in FY14, but added only two sizeable projects – Besar-A and Bergading – worth RM350m in Nov.
Bidding for RM3bn worth of new projects
MMHE is bidding for new projects worth an estimated RM3bn, including works at refinery and petrochemical integrated development (RAPID). However, we understand that the RAPID packages will only be awarded in 2H15. This points to a quiet 1H15 as the profits from Malikai and SK316 are only expected to start flowing substantially in 2H15.
Source: CIMB Daybreak - 06 February 2015
Target RM1.20 (Stock Rating: REDUCE)
Delays and provisions at its yard made FY14 the weakest year for MMHE since its listing. Net profit tumbled 45% to RM130m, missing expectations as it formed only 85% of our forecast and 81% of consensus. Adding to the worry is the company's dry spell, which resulted in the order book shrinking to a record low of RM1.6bn as at Dec 2014. We continue to value the stock at 15x CY16 P/E, on par with our target market P/E. We maintain our Reduce call, with the potential de-rating catalyst of longer project delays. Switch to SapuraKencana, our top pick among the oil & gas big caps.
Record low annual net profit
4Q14 net profit slumped 84% yoy to RM17m, mostly due to 1) delays and provisions for sizeable projects that include Cendor, and 2) the absence of substantial profit contributions from the Malikai and SK316 projects. EBIT margin deteriorated from 5.8% in FY13 to 2.7% in FY14. Consequently, FY14 net profit tumbled 45% yoy to RM130m, a new all-time low. We had expected a full-year DPS of 6 sen, but the company did not declare any.
Although we are disappointed with MMHE’s performance, we maintain our forecasts as Malikai and SK316 are expected to start contributing significantly in 2H15. Furthermore, we anticipate the order book momentum to pick up as new CEO Abu Fitri Abdul Jalil takes over the reins on 1 Mar. Abu Fitri joined Petronas in 1991 and has held various senior positions.
Order book challenge
Order book replenishment is critical for MMHE, which ended FY14 with an all-time low order book of RM1.6bn (Figure 1). Management had expected to secure RM1.5bn worth of new projects in FY14, but added only two sizeable projects – Besar-A and Bergading – worth RM350m in Nov.
Bidding for RM3bn worth of new projects
MMHE is bidding for new projects worth an estimated RM3bn, including works at refinery and petrochemical integrated development (RAPID). However, we understand that the RAPID packages will only be awarded in 2H15. This points to a quiet 1H15 as the profits from Malikai and SK316 are only expected to start flowing substantially in 2H15.
Source: CIMB Daybreak - 06 February 2015
