• Maintain BUY (TP: RM0.94). Malaysia Marine Heavy Engineering (MMHE) FY23 revenue of RM3.3bn (+100% YoY) made up 106% of our estimate. This is deemed as inline with our expectation despite the company suffered a large headline losses of RM484mn in FY23. To recap, the company incurred large losses in 2Q23 and 3Q23 mainly due to cost overruns which arises due to clients’ variation order and project delay for on-going projects. However, the company has managed to turnaround to black in 4Q23 as expected, recording a headline PATAMI of RM6.2mn. We remain optimistic that earnings will continue to normalise moving forward powered by revenue streams from newer projects and lower cost provision from bleeding contracts which are nearing completion. Reiterate a BUY call on MMHE with an unchanged SOP-derived TP of RM0.94.

• Key highlights. Heavy Engineering (HEU) revenue grew 79% QoQ to RM1bn on construction progress of on-going projects. Its PBT turned to positive of RM7.4mn mainly driven by higher revenue and partial recognition of cost recovery claims, partially negated by additional cost provision. On Marine repair (MBU) segment, it remained profitable with PBT of RM2mn despite profit margin declining due to intense competition. MBU revenue grew by 44% to RM98mn as the company conducted more repair and maintenance involving 23 vessels (3Q23: 11 vessels). On financial position, the company turned to net cash of RM190mn or RM0.12/share from net debt of RM53mn in 3Q23, driven by successful claim of cost recovery.

• Earnings Revision. No change to our forecast.

• Outlook. Orderbook was maintained at RM6.3bn (Chart 1) as the company managed to replenish its orderbook amounting to RM2.8bn in FY23. New orderbook secured in FY23 include (i) CPOC Andalas-Jengka WHP, (ii) subcontract job from Petrofac and (iii) Bunga Kertas. This is supported by robust tenderbook which currently stands at RM6-7bn.

Source: BIMB Securities Research - 15 Feb 2024