• Maintain BUY (TP: RM0.94). Excluding one-off items, Malaysia Marine Heavy Engineering (MMHE) 9MFY23 core PATAMI of RM24mn is deemed within our estimate. 3QFY23 headline losses narrowed to RM105mn (2QFY23 LATAMI: RM388mn) as two delayed projects – Kasawari and Jerun CPP are progressing towards tail-end at 89% and 86% of project completion respectively. We expect earnings to normalise moving forward powered by revenue streams from new projects. Reiterate a BUY call on MMHE with an unchanged SOP-derived TP of RM0.94.

• Key highlights. Heavy Engineering (HEU) revenue declined 42% QoQ to RM570mn on lower project progress following the sail-away of Jerun CPP jacket and Kasawari CPP topside structures in June 23 and August 23 respectively. However, its loss before tax (LBT) narrowed to RM108mn (2Q23 LBT: RM390mn) as it incurred smaller cost provision following the progress of both projects. On Marine repair (MBU) segment, revenue rose slightly by 4% QoQ but remain largely subdued at RM68mn with completion of repair and maintenance of only 11 vessels (3Q22: 28 vessels, 2Q23: 19 vessels). Similarly, PBT rose by 30% QoQ to RM4.3mn (2Q23L RM3.3mn) driven higher value repair jobs.

• Earnings Revision. No change to our forecast

• Outlook. Orderbook remains solid at RM5.7bn (2Q23: RM6.3bn) whereas tenderbook currently stands at RM2-3bn. Kasawari CPP was successfully installed at the site as of Sep 2023 and thus currently undergoing its final phase of hook-up and commissioning before the expected first gas in mid- 2024. Meanwhile, Jerun CPP topside structure is expected to be delivered by 1Q24. We expect losses related to these behind-schedule projects to be minimal thereby improving its earnings moving forward. This will be further supported by new revenue stream from CPOC Andalas-Jengka project which is expected to be on full swing beginning 4Q23 following the completion of reactivation work of East Yard in Aug 2023.

Source: BIMB Securities Research - 9 Nov 2023