Overview. MMHE’s 1QFY21 net loss widened to RM106m mainly due to cost provision made possibly due to the dispute with Boskalis for the delay in the HUC of Bokor CPP project. Revenue was largely flat yoy at RM343m due to progressive revenue recognition of ongoing Kasawari EPCIC project. In the marine segment, revenue declined by 61% yoy and 67% qoq to RM39m due to lack of repair jobs amidst strong daily charter rate of tanker vessels.

• Key highlights. Currently there are 2 on-going projects in the yard including Kasawari CPP and Bekok WHP project.

• Against estimates: Below. 3MFY21 core loss of RM106m was below expectation. We cut our FY21 earnings forecast to loss of RM20m (from profit of RM 30m) to account for cost provision made in 1Q21 which we estimate at RM50m.

• Outlook. Its orderbook grew to RM3bn (4Q20: RM1.9bn) following SapuraOMV’s Jerun CPP project award. Tenderbook submitted stands at RM7bn (4Q20: RM12bn).

• Our call. Stock price has retreated from its peak of RM0.745 possibly due to weak performance anticipated for 1Q21. Nonetheless, we remain optimistic on the company’s outlook as we believe the company stands to become the main beneficiary of the revival of local offshore development projects. Reiterate BUY with unchanged SOP-derived TP of RM0.83 which implies 0.7x P/B FY21F.

Source: BIMB Securities Research - 30 Apr 2021