• Overview. 2Q19 net loss narrowed to RM9m as MBU segment returned to profit of RM9m, partially offsetting loss in HEU segment. Total revenue rose to RM276m (+24% yoy, +36% qoq) due to higher revenue from both segments.

• Key highlights. Bokor CPP project reached 58% completion (1Q19: 37%) while 3 projects were completed (Table 2). On MBU segment, higher drydocking activities were carried out involving 6 LNG carriers (1Q19: 4) and 20 various vessel repairs (1Q19: 18 vessels)

• Against estimates: below. 1H19 core loss of RM41m were below ours and consensus’ estimates which are expecting the company to return to the black in 2019.

• Outlook. On MBU, drydocking activities will rise further in 2H19 due to IMO 2020 rule implementation. On HEU, it secured Kasawari CPP EPCIC from PETRONAS Carigali for c.RM2bn. This expands its current orderbook to c.RM2.9bn, equivalent to c.5x of FY18 HEU revenue.

• Re-rating catalyst. Secure work orders from Aramco/offshore windfarm projects which could improve East yard utilisation rate which is currently idle.

• Our call. Maintain HOLD with an unchanged SOP-based TP of RM0.83. This implies 0.55x FY19F P/B. We think its sizable orderbook and net cash balance of RM444m which amounts to RM0.28/share could provide stability while awaiting more work orders. Buy on dips.

Source: BIMB Securities Research - 5 Aug 2019