- We maintain our HOLD call on Malaysia Marine & Heavy Engineering
Holdings (MMHE), but with a reduced fair value of RM4.60/share (vs. an earlier
RM5.15/share) based on an unchanged rolled-forward FY13F PE of 20x – 10% below
Kencana Petroleum’s peak of 22x in 2007.
- We have lowered MMHE’s FY13F-FY14F net profits by 11%-15%
due to the RM1bil-RM2bil decrease in our new fabrication order assumptions to
RM3bil-RM5bil as the group is likely to miss out on securing any of the fabrication
jobs for Petronas’ two upcoming floating liquefied natural gas vessels (FLNG).
- Japanese engineering giants JGC Corporation and Toyo Engineering
& Construction have confirmed that they have been awarded front-end
engineering and design (FEED) contracts for the Rotan FLNG – Malaysia’s second
unit after the Kanowit FLNG. This FLNG will develop the Rotan and Biris fields,
off Sarawak, in Block H operated by Murphy
Oil of the US.
- The FEED study for the Rotan FLNG vessel, which will have
an annual capacity of 1.5mil tonnes, is scheduled for completion in 2Q2013.
Upstream reported that Petronas will later select one of the two consortiums
for the engineering, procurement, construction, installation and commissioning
of the FLNG vessel, which is scheduled to start production in 2016.
- This could mean that MMHE, which is still trying to complete
the long-delayed Gumusut-Kakap floating production storage semi-submersible, is
unlikely to secure any fabrication contract for the two fast-tracked FLNG projects
from Petronas.
- Recall that MMHE had also earlier missed out on the engineering,
construction and fabrication contract for the Kanowit FLNG, which was awarded
to Technip and Korea’s Daewoo Shipbuilding & Marine Engineering.
- While the group is actively involved in 15 tenders worth
up to RM5bil, these include overseas projects such as the Browse jackets in
Australia for Woodside Petroleum and the 6,000 tonne platform for Central
Diyabekir field in Turkmenistan – for which the success rate and rollout timeline
are not as visible vis-a-vis domestic jobs.
- After our earnings cut, the stock currently trades at an unexciting
FY13F PE of 21x vs. 18x for oil & gas stocks with market capitalisation of
over RM1bil.
- There is a strong possibility that MMHE will be dropped from
the FBMKLCI index, with the inclusion of SapuraKencana Petroleum and FELDA
Global Ventures Holdings.
Source: AmeSecurities
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