MMHE’s clients pause projects even though tenders submitted

“However, from a stock trading standpoint, we do not foresee any significant near- term rerating catalyst which would cap stock price appreciation in the immediate term, even from this new win which will only start contributing in the latter part of FY18 and only more significantly in FY19,” the research arm said.

According to Kenanga Research, MMHE’s clients have continued to put on hold new projects even though tenders have been submitted.

“Post Bokor contract award, tender book is reduced to RM3.4 billion, of which RM1.7 billion is expected to be awarded in FY17,” the research arm said.

“Meanwhile, MMHE is also eyeing a portion of another Petronas’ project involving maintenance, construction and modification (MCM) with value of up to RM500 million which could be out end of this quarter,” the research arm said.

Post contract award, Keannga Research had increased its FY17 order book replenishment assumption to RM1.5 billion from RM500 million previously.

However, the research arm maintained its FY17E earnings forecast as this contract will only start contributing in FY18.

“Following that, FY18E earnings is revised up by 36 per cent to RM25.5 million,” it said.

The research arm maintained its ‘underperform’ call on the stock in view of limited fabrication job given flattish capex spending from oil majors. For MIDF Research, as the contract is only expected to start by 2QFY18, the research arm thus increased its earnings estimates for FY18 by 20.8 per cent to RM79.6 million.

“With the new contract win, MMHE’s current heavy engineering orderbook stands at approximately RM2 billion from RM1 billion previously. From the current job profile and work orders, approximately RM300 million to RM500 million of the order backlog will be recognised in FY17,” it said.

The research arm further estimated that an additional RM400 million to RM500 million worth of marine works will be undertaken in FY17 – the company’s current dock capacity.

All in, MIDF Research reiterated its ‘sell’ recommendation with a revised target price of RM0.70 per share.