THE BUZZ
Yesterday, MMHE announced that its 100%-subsidiary, Malaysia Marine and Heavy Engineering SB, was successful in its bid for the F14/F29 project comprising 3 structures by Sarawak Shell Bhd, which includes F14DR-A Topsides, F14/F29 Process Module and a F14DR-A Jacket. The combined value of the project is RM278m.
OUR TAKE
Positive news but no change to our FY12-13 forecast earnings. This is because we had earlier assumed some orderbook replenishment for the company.
2HCY12 would be a more exciting quarter for O&G industry. Among all the 4 quarters of the year, 3Q is traditionally the strongest quarter for O&G activities as well as new contract awards. Hence, we expect more new O&G awards by Petronas and its PSC contractors, especially relating to brownfield services and enhanced oil recovery, to immediately boost O&G production in Malaysia. We believe this is especially true in order to compensate for the loss of production from Petronas’ Sudan operation. Hence, all O&G services providers, including MMHE, should see a stronger quarter in 3QCY12. Beyond this quarter, Petronas and its PSC contractors would wind down their activities to prepare for the monsoon season.
Maintain Neutral. Our fair value for the stock remains unchanged at RM5.40, based on a PER of 23x FY12 EPS. Nevertheless, we continue to like the company for its market leadership in Malaysia via its 3 core businesses comprising heavy engineering and construction, marine conversion and marine repair.
Source: OSK
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