Period 4Q12/12M12
Actual vs. Expectations
The estimated 4QFY12 core net profit
of RM58.5m brought the full year FY12 net profit to RM200.2m. This was within
our full year 2012 estimate (RM204.6m). However, it was slightly below the
market expectations as it made up only 90.2% of the consensus full year estimate
(RM222m). Our core net profit excludes the RM41m deferred tax hit from the
utilisation of MHB’s Income Tax Account (ITA).
Dividends A NDPS
of 10 sen was declared. This was expected and similar to the previous year.
Key Results Highlights
QoQ, the sequential core net profit
rose >100% due to the normalisation of profits in the quarter. Recall that
in 3QFY12, MHB made provisions for variation orders (VOs) for the FPSO Cendor
project. Such VOs are still under negotiation, but management reaffirmed that
there were no further provisions within the quarter.
YoY, the core net
profit grew 26.2% (from RM46.4m) as 4QFY11 earnings was hit by a sluggish
contract revenue recognition then.
On a YTD basis, the
FY12 net profit was down (40.1%) mainly due to: 1) the high provisions for the
FPSO Cendor project recognised in 2012,
and 2) JCE losses (RM25.1m) due to the final close-out of the Turkmenistan
project in the quarter.
Outlook The total order book inclusive of the MHB’s
50% stake in the Malikai project stands currently at around RM3.0b (as at
Sept-12, it was RM2.46b). The tender book stands at RM5.0b with equal
contributions of local and international bids.
MMHE could be on a
stronger footing post the load-out of Gumusut-Kakap (expected in Apr-13) and
the Malikai win (which will take up the fabrication space currently occupied by
Gumusut-Kakap. However, we are still wary of its: 1) project execution
capability to garner better margins; and 2) its ability to win contracts given
that the local and international bidding landscape is purportedly getting more
competitive.
Change to Forecasts We are fine-tuning our FY13 forecasts to
include lower contract wins on a consolidated basis (RM2.8b new wins versus the
previous estimate of RM3.0b) but are increasing our JV earnings for the Malikai
project, which we expect to see RM12m-RM28.7m in earnings for FY13-14. We are
assuming a 5-month contribution in FY13. Overall, our FY13-14 estimates have
been increased by 0.8% and 4.0% respectively.
Rating The share price has fallen steeply to RM4.08
making the stock more attractive on the valuation front. As such, we are
upgrading our call to a MARKET PERFORM
from an UNDERPERFORM.
Valuation The
changes in our earnings estimate have resulted in our target price increasing
marginally to RM4.05 (from RM4.02) based on an unchanged 18x PER on CY13 EPS.
Risks Higher than expected project wins and an
acceleration in its project executions.
Source: Kenanga
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