Period 2Q12
Actual vs. Expectations
The net profit of RM55.3m was below expectations.
This resulted in 1HFY12 net profit (RM133.6m) accounting
for only 38% of ours (RM349.5m) and the consensus’ estimate (RM347.3m).
The main variance with our estimate was the lower-than-expected
margin from the offshore division.
Dividends No dividend was declared.
Key Results Highlights
QoQ, despite a 45% increase in revenue (RM965.7m),
the net profit (RM55.3m) was down by 29%, mainly due to lower-than-expected operating
margins in the offshore division and 2) the high-base effect of excess margins recognised
for projects like Tapis and Teluk that started to contribute to profits in
1QFY12.
YoY, net profit dipped 30%, again, mainly due
to lower margins from the offshore division. Lower Joint Company contributions
were also the other driver.
As a result, 6MFY12 net profit (RM133.m) was down
36% from 6MFY11 net profit.
Outlook Order book now stands at RM2.7b (from RM2.3b in
Mar 2012).
We are still negative on the short term
prospects as 1) MMHE’s existing yard facilities are constrained by projects
that have yet to be delivered (i.e Gumusut-Kakap and Kebabangan)
There is a relative certainty of Turkmenistan project
wins within the year but they are unlikely to be significantly large.
Malikai project is also a likely win but it
will potentially be of lower contribution as it is to be executed via a JV with
Technip.
Highly susceptible to a de-rating in the event
MMHE drops out from FBMKLCI Index due to its low weighting (~0.48%).
Change to Forecasts
We are trimming our FY12-14 earnings by 14.4%,
9.2% and 7.4% respectively on the back of lower contracts wins going ahead.
Rating
MAINTAIN UNDERPERFORM
Valuation Our target price has been reduced to RM4.22 based
on 18x targeted PER on our revised CY13 EPS of 23.4 sen.
Risks Risks to our call are 1) higher-than-expected project
wins and 2) acceleration in project executions.
Source: Kenanga
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