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.
