• MMHE secured Jerun CPP EPCIC project from SapuraOMV expected to be worth RM1.4bn (USD350m).

• This contract boosted its orderbook to RM3.3bn. We expect it to secure additional RM600m/RM1bn orderbook in FY21F/FY22F from its tenderbook of RM11bn.

• We think this project will provide the required economies of scale to ensure the company returns to profitability in FY21-23F. We raised our FY21F/FY22F/FY23F earnings forecast by 126%/61%/59% to account for the project.

• Maintain BUY on MMHE with higher SOP-derived TP of RM0.83 (from RM0.77) with 40% upside. Our TP implies FY21F P/B of 0.55x. We think recent stock price correction provides good buying opportunity ahead of new investment cycle in offshore projects.

Against all odds

MMHE secured a new large project from SapuraOMV to develop the latter’s SK408W Jerun gas field offshore Sarawak. The scope of works encompasses the EPCIC of approximately 15,000 MT topside, 10,000 MT jacket and 5,000 MT piles of central processing platform (CPP). Besides that, it is also appointed to undertake design engineering of a 30-inch carbon steel pipeline with a total length ok 80km linking the Jerun CPP to existing E11R-B platform which serves as host tie-in platform to eventually commingle with existing trunkline to Petronas’ Malaysia LNG (MLNG) Plant in Bintulu, Sarawak.

Boosted orderbook to RM3.3bn

While the company did not disclose the contract amount, we estimate the project to be worth c.RM1.4bn as the structures are larger than Bokor CPP EPCIC project. For comparison, the contract value for Bokor CPP project with total weight of c.19,000 MT stood at c.RM1bn. This boosted its orderbook to RM3.3bn (4Q20: RM1.9bn) which will keep the company busy until 2023.

Upgrade earnings forecast

We raised our FY21F/FY22F/FY23F earnings forecast by 126%/61%/59% to account for Jerun CPP project (Table 1). Apart from this, we expect the company to secure additional orderbook worth RM600m/RM1bn in FY21F/FY22F from modular fabrication projects such as Aramco/ windfarm project.

Maintain BUY with higher TP RM0.83

Maintain our BUY recommendation on MMHE with higher TP of RM0.83 (from RM0.77) (Table 2). We believe the company stands to become the main beneficiary of the revival of local offshore development projects.

Source: BIMB Securities Research - 14 Apr 2021