• MMHE secured its maiden fabrication work for offshore windfarm that is worth RM1.2bn from Petrofac. This entails the construction of an offshore substation (OSS) that will begin in 2025 until 2028.

• We are positive with this contract win as it boosted its orderbook by 21% to RM6.9bn. More importantly, we believe this will sustain its orderbook in view of on-going discussion to construct additional 2 OSS to the end clients.

• No changes is made to our earnings forecast as we have imputed this under our modular project revenue streams assumption.

• Reiterate our BUY call on MMHE with an unchanged SOP-derived TP of RM0.94 which implies 0.8x FY24F P/B. We believe this new venture will sustain the utilisation rate at its newly-rejuvenated East Yard and thus provide key re-rating catalyst to the stock.

Secured Maiden Work Order for Offshore Windfarm

MMHE announced that it has secured a subcontract work from Petrofac that is worth RM1.2bn. The contract entails the construction of an OSS high voltage direct current (HVDC) platform for TenneT’s 2GW offshore windfarm in Netherland. The platform consists of topside and jacket for Ijmuiden ver Alpha Project with a total weight of 40,000 tonnes. The duration of the contract is approximately 54 months with fabrication to begin in 2025 and completed by 2028. Currently, the company is doing the detailed engineering work following the completion of preparatory works and deployment of key personnel since 3Q23.

Sustaining Orderbook at RM6.9bn

Following the latest job win, MMHE orderbook expanded by 21% to RM6.9bn. We make no changes to our earnings forecast as we have imputed the revenue stream from modular projects into our assumption. Overall, we are positive with this contract as it marks it maiden venture offshore windfarm supply chain. We see lower risk of cost overruns for this project given the scope of work is limited to engineering, procurement and construction (EPC). On top of this, the company is also in discussion with Petrofac to construct additional two OSS which will sustain its orderbook from the segment. Hence, we believe it will diversify its revenue base away from cyclical O&G project as well as sustaining the utilisation rate at the East Yard.

Maintain BUY with unchanged TP RM0.94

Reiterate a BUY call on MMHE with an unchanged SOP-derived TP of RM0.94. Our TP implies a higher FY24F P/B of 0.8x. Key risk to our recommendation is project cost overruns.

Source: BIMB Securities Research - 30 Nov 2023