KUALA LUMPUR: Despite the RM1 billion contract win for a central processing platform (CPP) from Petronas Carigali Sdn Bhd, analyst have maintained a “hold” call for Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE).
AmInvestment Bank (AmInvest) has also given MMHE an unchanged fair value of RM1.00 based on a 40 per cent discount to its forecasted financial year (FY) 2017 book valuation.
"Our forecast for FY 2017 to 2019 earnings are maintained, as we have already incorporated new annual order intakes of RM1.2 billion to RM1.6 billion, of which the Group has guided on potential ongoing and planned tenders of RM11.3 billion," AmInvest said in a note earlier today.
With the first steel cut expected to commence in the third quarter of next year, the CPP project is scheduled to be completed in the middle of the second quarter of 2020.
Upon completion, it will be installed at Bokor field, located in the Baram Delta, off the shores of Sarawak, at a depth of 70 metres.
"With this new job, we estimate that the Group’s order book, assuming a quarterly depletion of RM300 million, would have risen by 66 per cent to RM1.75 billion from RM1.05 billion, as at 31 Dec 2016.
"MMHE has been implementing measures to improve its cost efficiencies, but we expect minimal contributions for this year, given the initial stage of the EPCIC," AmInvest said.
The research house notes that even with the higher yard utilisation in the fourth quarter of financial year 2016, MMHE’s revenue for the period declined 9 per cent quarter-on-quarter (QoQ), which resulted in a core loss of RM40 million, including additional one-off margins from marine change orders.
Hence, the group’s earnings momentum is unlikely to gain traction this year, the research house said.
Furthermore, MMHE’s management has acknowledged the slow rollout of upstream jobs, as scheduled awards have been postponed due to the uncertain oil price trajectory.
"This Bokor project is much needed for MMHE’s West yard, as its current yard utilisation of 50 per cent to 60 per cent could drop to a relatively idle capacity with the completion of the Baronia CPP and F12 Kumang topside by the first half of financial year 2017.
"Only the covered workshops in the West and East yards will be busy with the five packages worth RM246 million from the Refinery and Petrochemical Integrated Development," AmInvest said.