• MMHE announced that it has secured an EPCIC contract worth  c.RM4.5bn to build a CCS platform for Petronas Carigali. Upon  completion, the project will be the largest offshore CCS project in the  world and the first CCS project in Malaysia.

• We are optimistic with this contract award as it will triple its  orderbook to a record RM6.6bn which will keep the company busy  until 2025.

• Reiterate our BUY call on MMHE with a higher SOP-derived TP of  RM0.78 which implies 0.7x FY23F P/B. We think this is justified amidst  stronger earnings visibility.

Secured Kasawari CCS Platform from Petronas Carigali

MMHE announced that it has secured an engineering, procurement and  construction, installation and commissioning (EPCIC) contract for the  Kasawari Carbon Capture and Storage (CCS) project offshore Sarawak from  Petronas Carigali. The contract entails the construction of 14,000 metric  tonne (MT) topside, a 15,000 MT 8-legged jacket of Kasawari CCS platform  and a bridge linking to Kasawari Central Processing Platform (CPP). The  total contract value of the project is approximately RM4.5bn to be  completed within 35 months. Upon completion, the platform will be  installed in a water depth of 108 metres within SK316 area, approximately  200km offshore from Petronas LNG Complex in Bintulu, Sarawak. It will  also capable to capture up to 3.3mn tonne per annum of carbon dioxide  (CO2) which will be the largest offshore CCS project in the world by volume  of CO2 captured. Subsequently, the captured CO2 (a total of c.71-76mn  tonnes of CO2) will be reinjected into nearby M1 field which is located  c.138km from the CCS platform via a pipeline.

Orderbook Rose to a Record High

We are positive with this contract award as it will triple its orderbook to  c.RM6.6bn (from RM2.2bn), which will keep them busy until 2025. More  importantly, this project should improve its ESG rating as it will support  Petronas’ GHG emission target by reducing carbon emission and zero  continuous flaring and venting. This contract award also signifies its cost  competitiveness as it was secured based on a front end engineering and  design (FEED) competition.

Earnings revision

We believe MMHE will be able to record sustainable profit in FY23-25F  following this contract award. Accordingly, we raise our  FY23F/FY24F/FY25F earnings forecast to RM64mn/RM55mn/RM50mn.

Reiterate a BUY call on MMHE with TP of RM0.78

We reiterate our BUY recommendation on MMHE with a higher TP of  RM0.78 (from RM0.65) which implies 0.7x FY23F P/B. We believe this is  fair amidst stronger earnings visibility. Key risk to our forecast and  recommendation is project cost overruns.

Source: BIMB Securities Research - 30 Nov 2022