MMHE outlook seen mixed despite better Q3

PETALING JAYA: The sentiment over Malaysia Marine and Heavy Engineering Holdings Bhd’s (MMHE) prospects remains mixed despite the offshore oil and gas services company’s return to the black in its third quarter ended Sept 30.

The company swung to the black after nine consecutive quarters of losses. MMHE recorded a net profit of RM16.41mil in the quarter under review compared with a net loss of RM4.53mil in the same quarter last year.

It remains in the red for the current nine-month period, although losses have improved compared to the same nine-month period last year.

Affin Hwang Capital Research, which has maintained a “hold” call on MMHE, said the company’s lower heavy engineering segment operating loss lifted earnings.

“We think this huge improvement in earnings could, however, be one-off, potentially as a result of a reversal of provisions made earlier on certain projects.

“Nevertheless, we expect financial year ending Dec 31, 2018 (FY18) earnings to turn around on the back of better visibility on workflows,” said the research house, adding that it had increased the target price to 81 sen from 73 sen previously.

With regard to the FY17 earnings estimates, Affin Hwang Capital Research has made no changes to MMHE’s forecasts. This is on the back of an expected slight loss in the fourth quarter.

Meanwhile, Hong Leong Investment Bank (HLIB) Research said MMHE’s core profit of RM20.7mil was within expectations.

“We expect the company’s results in the fourth quarter to revert back to losses due to expectations of a lower revenue amid lower work orders. Most of the group’s major projects have been completed or are in the final stage. Replenishment of orderbook remains slow due to a lack of contract awards by oil majors,” said HLIB Research.