MMHE yet to turn the corner, needs consistent job replenishment

PETALING JAYA: Despite Malaysia Marine and Heavy Engineering Holdings Bhd’s (MMHE) recent Jerun Central Processing Platform (CPP) contract, Hong Leong Investment Bank (HLIB) Research remains concerned about the prospects of the company as it requires increased work acitivities to breakeven going forward.

MMHE recorded a lower core net loss of Rm6.7mil in the first quarter ended March 31, 2022 (1Q22) from net loss of Rm106.6mil in 4Q21 due to the improved performance of its marine segment as a result of higher dry-docking activities throughout the quarter and higher job completion for its heavy engineering segment’s on-going projects in 4Q21.

That said, HLIB Research said its core net loss was within its and consensus full-year forecasts. However, the research house said the MMHE would need increased work activity and job replenishments to breakeven.

“While we believe that financial year ending Dec 31, 2022 (FY22) would be a better year for MMHE, we believe that the group has yet to turn the corner and will require more consistent job replenishments and increased work activity to breakeven.

“Also, we do not discount the possibility of further cost overruns or delivery delays for its current projects despite its high orderbook backlog,” he added.

As of end-march 2022, the group’s current order book and tender book stood at Rm1.9bil and about RM18 to Rm19bil respectively.

Besides that, HLIB Research has announced that it will cease coverage on MMHE due to reallocation of internal resources and lack of investor interest on the company.

“Our previous “sell” recommendation and target price of RM0.35 based on 0.3 times for FY21 forecast price-to-book ratio (P/B), which is at a 30% discount to its five-year historical mean P/B on MMHE should no longer be used as a reference going forward,” it noted.