Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), via its Technip-MMHE joint venture has secured an engineering, procurement, construction, installation and commissioning (EPCIC) contract for two gas fields in block SK316 offshore Bintulu, bumping up its total current orderbook to approximately RM3 billion.
The contract, which was estimated to be valued at US$1 billion, was awarded by Petroliam Nasional Berhad (Petronas) and is the first gas project targeted for late 2015 to tie in with the commencement of the ninth liquified natural gas (LNG) train at the Bintulu complex.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) analyst Aaron Tan in a recent note, said “We are positive on this news as it has been eight months since MMHE last secured a substantially-sized project.”
He further highlighted, “Inclusive of this new job win, the group’s current orderbook is approximately RM3 billion. The bulk of the previous backlogs are from the tension leg platform (TLP) Malikai, Kebabangan and Tapis jobs.
“Year-to-date, MMHE has secured two major contracts worth more than RM2.5 billion (MMHE’s portion). This has surpassed our full year new orders replenishment of RM2.2 billion.”
In a separate note, RHB Research Institute Sdn Bhd (RHB Research) outlined that assuming a 50 per cent portion of the project value is attributable to MMHE, it estimated the contract to lift the group’s orderbook by 90 per cent to RM3.4 billion from RM1.8 billion, thus enhancing MMHE’s earnings visibility.
On the other hand, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) cautioned, “We suspect competition will intensify with additional fabrication licences being dished out (which are Muhibbah and KKB Engineering), but MMHE is likely to maintain its edge in heavy-tonnage and complex projects given its track record and tie-up with the global heavyweight Technip.”
Meanwhile, it noted, MMHE’s tender book stands at RM4.5 billion with the majority (approximately 50 to 75 per cent) comprising domestic contracts.
“Management admitted that the contract-flows have been pretty slow lately but expected pace to pick up by year-end,” the research firm noted.
MIDF Research maintained a neutral stance on MMHE with a higher target price pegged at RM3.76 per share from the previous RM3.59 per share. Similarly, RHB Research maintain its financial year 2013 to 2015 forecast earnings per share (EPS) estimates for MMHE with a neutral rating and RM4.11 per share fair value. Kenanga Research maintained its target price of RM3.39 per share based on an unchanged 18-folds price earnings ratio on 2014 EPS.