Valued at
approximately USD775m (c.RM2.4b), the project will be shared on a 50:50 basis
and is purportedly expected to be completed by 3QCY15. This implies that MMHE’s
portion of the contract is c.RM1.2b.
Comments We are
not surprised by the win and the JV deal as market talk earlier was that MMHE was
the frontrunner for the Malikai project and that the project would likely be
shared with Technip.
The project will lift
MMHE’s order book to c.RM3.7b (accounting for only MMHE’s 50% stake) and
assuming an EBIT of 5%-10%, the project will yield around RM60m-RM120m
(c.RM22m-RM44m p.a.) to MMHE (100% stake is c.RM120-240m) for the tenure of the
project.
While the win will
boost MMHE’s order book, it is within our new wins forecast of RM3.0b for FY13.
Furthermore, the earnings will only be equity accounted in MMHE books.
Outlook We are
still negative on the company’s short term prospects due to: 1) its existing
yard facilities that are still constrained by projects that have yet to be delivered
(i.e. Gumusut-Kakap and Kebabangan); 2) spotty execution track record which
typically leads to longer-than-expected project durations.
Forecast We are
maintaining our earnings estimates pending the upcoming 4QFY12 results
(expected by end-Feb 13). We, however, foresee no major surprises barring another
provision for the Cendor FPSO project, which management has guided to be highly
unlikely.
Rating Maintain
UNDERPERFORM
Valuation Our
target price of RM4.02 is based on an unchanged targeted CY13 PER of 18.0x
(which is at a premium against the sector’s average PER of 15.0x as Petronas’ patronage
guarantees MMHE a certain degree of contract replenishment).
Risks 1) A
higher than expected project wins and 2) an acceleration in its project
executions.
Source: Kenanga
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