• Overview. MMHE’s 1Q22 turned in a headline PATAMI of RM2.7m aided by a one-off reversal of net impairment loss on trade receivables amounted to RM9.4m. Excluding this item, MMHE was still in the red with core LATAMI of RM6.6m. Revenue improved by 22% yoy to RM417m but declined slightly by 3% qoq dragged by weaker demand for marine repair segment.

• Key highlights. Orderbook remains strong at RM1.9bn (4Q21: RM2.2bn) with Kasawari and Jerun EPCIC represent the large chunk of the orderbook. It received a small order intake worth RM22m for the front-end engineering and design (FEED) work for the Carbon, Capture and Storage (CCS) Kasawari project.

• Against estimates: Inline. 1QFY22 revenue of RM417m made up 16% of our FY22F estimate. We deem this as within our estimate on the expectation of recovery in marine repair activities as the country is transitioning into the endemic phase.

• Outlook. Its tenderbook has grown to RM18bn which is primarily comprised of international projects at 85% of tenderbook. Management expects some projects worth RM3bn will be finalised in FY22. This includes (i) Shell’s Crux CPP project in Australia, (ii) Shell’s Rosmary & Marjoram project in Malaysia and (iii) PTTEP’s Lang Lebah project in Malaysia. To recap, our forecasts are based on HEU’s annual orderbook replenishment assumption of RM1bn.

• Our call. Reiterate BUY on MMHE with unchanged TP of RM0.65 which offers a 57% upside. This implies 0.5x FY21F P/B (Table 4). Our Buy recommendation is premised on (i) the full opening of the country’s border to improve its marine segment and (ii) potential new project awards in coming quarters that could catalyze its stock price higher.

Source: BIMB Securities Research - 23 May 2022