Thursday 10 May 2012

MHB (FV RM5.40- NEUTRAL) 1QFY12 Results Review: Gradual Recovery Seen



MHB’s 1QFY12 results were within our expectations, although  these were  below consensus. Our  estimates  were lower as we  have become  less bullish on the company  after it encountered project  delivery delays in the last few quarters. Going forward, we expect a stronger 2Q and 3Q since O&G activities in Malaysia usually peak during these quarters as weather conditions improve and Petronas and its PSC contractors bolster spending. Maintain Neutral for now.

Within anticipation. Although MHB’s 1QFY12 results  were below consensus expectations, the numbers were  nevertheless within our estimates, making up 19% and 21% of the  respective FY12 forecasts. Our expectations were lower as we  had become less bullish on the company after it encountered  project delivery delays in the last few quarters. Despite recording  a  slightly lower revenue of RM665.3m (-7.1% q-o-q) in 1QFY12, its net profit of RM78.3m was actually higher by 68.8% due to the recognition of higher margin contracts, especially by the engineering and construction division. Also, the performance of the group’s marine conversion and repair division also improved.

Maintain Neutral. We are also keeping our FY12 earnings forecast unchanged for now although the 1QFY12 numbers only contributed about 21% to our full-year FY12 net profit estimate. We expect higher contributions from 2Q and 3Q this year since O&G activities in Malaysia usually peak during these quarters  in light of better weather conditions and higher spending from Petronas and its PSC contractors  (which usually spend their allocated capex in 1Q every year). Also, our fair value for the stock remains unchanged at RM5.40, based on the existing PER of 23x FY12 EPS.

Source: OSK188

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