• Overview. MMHE 4Q19 turned to core profit of RM18.8m on the back of stronger MBU segment supported by a tax credit gain of RM6.4m. Our core profit is after excluding provision for receivable worth RM8.6m. On qoq basis, revenue rose by 8.4% to RM275m while EBITDA jumped by 48% to RM23m driven by higher-margin conversion works of FPSO Ledang to Vestigo Petroleum.
• Key highlights. HEU revenue declined 3% qoq and 34% yoy to RM148m as most tail-end projects were completed earlier of the year. Notwithstanding, it managed to replenish its orderbook worth RM420m from local offshore development projects (i.e. Bekok WHP and Bergading MRU) and Vietnam which shall be completed in 2020.
• Against estimates: inline. FY19 core loss narrowed to RM34m (FY18: RM115m core loss) which was inline with both our and consensus’ estimates.
• Earnings forecast. We maintain our FY20-22F earnings forecast, but upside potential to earnings is probable on higher contract wins (YTD: RM420m vs our assumption of RM1bn). We expect MMHE’s financial to turn to black in FY20 underpinned by (i) profit recognition from Bokor project; (ii) higher yard utilisation from modular projects and (iii) resumption of drydocking activities postIMO 2020.
• Outlook. The new work orders boosted its current orderbook to RM2.9bn (3Q19: RM2.7bn). Tenderbook stood at RM12.9bn (3Q19: RM13.7bn) which bulk of them coming from offshore windfarm and onshore module fabrication projects.
• Our call. Reiterate our BUY call on the stock with unchanged SOPbased TP RM0.90 which implies 0.6x FY20F P/B (Table 5). We think its sizable orderbook and net cash balance of RM493m (as at 4Q19) or RM0.31/share, could provide stability while awaiting more work orders.

Source: BIMB Securities Research - 13 Feb 2020