News

• MMHE has been awarded an Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) of Central Processing Platform (CPP) for the Bokor Phase 3 Re-Development Project by PETRONAS Carigali Sdn. Bhd. (PCSB). The contract value of this EPCIC project is worth approximately RM1.0bn.
• The first steel cut is expected to commence in Q3 2018 and complete in mid Q2 2020. Upon completion, the new CPP will be installed at Bokor field located in Baram Delta, Offshore Sarawak, in a water depth of 70 meters. Financial Impact
• While we are positive on the news, this is not a surprise to us as the company has already been the front runner for the bidding of the contract since 2H16.
• Unlike more technically challenging deep sea platform contracts (i.e. Malikai TLP platform and etc), the execution of this contract would not be a major issue for the company as it has long standing track record in handling CPP –related projects.
• Yearly revenue contribution of the contract is expected to be circa RM500m with EBIT margin at 4-5%. We have already assumed the contract as part of our revenue growth projection for FY18-19F.

Forecast

• Unchanged

Rating

BUY (↑ )

• More contract replenishment is still needed despite the recent major Bokor CPP win for the company to hit our revenue target for FY18 and FY19. While full recovery is still far off, early signs of pick up in activity are seen with oil majors expected to spend more CAPEX in the sector in the medium term.

Valuation

• We upgrade to BUY (from HOLD) with unchanged TP of RM1.11 based on unchanged 0.7x FY17 PBV multiple. We believe the recent share price underperformance present attractive entry point to accumulate the stock given the improvement in MMHE outlook.

Source: Hong Leong Investment Bank Research - 18 Apr 2017