• Overview. MMHE’s 4Q21 headlline loss increased qoq to RM108m mainly due to provision for additional costs related to revision for Kasawari project schedule due to Covid-19 impact. Excluding this, core loss actually narrowed qoq to RM8m (3Q21 core LAT: RM21m) driven by higher revenue from both heavy engineering (HEU) and marine repair (MBU) segments.

• Key highlights. HEU revenue grew by 17% qoq to RM354m as new Jerun EPCIC project progressed whereas MBU continued to see recovery in terms of number of vessels entering into drydocks as border restriction eased. Kasawari and Jerun EPCIC forms bulk of its firm orderbook worth RM2.2bn (3Q21: RM2.5bn).

• Against estimates: Below. FY21 headline loss of RM270m exceeded our LAT estimate of RM169m mainly due to additional cost provision made in 4QFY21.

• Outlook. The company’s financial position remains robust with cash of RM709m which will allow the company to continue bidding for more projects. Its tenderbook has grown to RM14bn which primarily comprised of international projects at 85% of tenderbook including c.RM3bn worth of bids submitted in offshore windfarm fabrication. Management expects projects worth RM3bn out of the total bid book will be finalised in FY22 which includes Shell’s Crux CPP (Australia) and Rosmary & Marjoram field as well as PTTEP’s Lang Lebah. To recap, our forecasts are based on HEU’s annual orderbook replenishment assumption of RM1bn.

• Our call. Maintain BUY on MMHE with unchanged TP of RM0.65 which offers 61% upside. This implies 0.5x FY21F P/B (Table 4). We see MMHE to benefit from (i) the full opening of the country’s border allowing more vessels to enter into its drydock yard and (ii) the roll-out of local fabrication projects given that Sapura Energy is currently facing cashflow problem.

Source: BIMB Securities Research - 14 Feb 2022