MMHE announced that it has been awarded 2 contracts (i) from Petronas Carigali for 2 Wellhead platforms for the Bekok Oil Project and (ii) an award from HESS for one MRU for the Bergading project. We understand that the Bekok Wellheads are similar in size to their recent sail away (Tembikai), thus implying that the award is worth c.RM200-300m. Forecast unchanged as we have already factored in RM1.0bn in orderbook replenishment for FY20-21. Maintain HOLD with unchanged TP of RM0.89 pegged to 0.6x FY20 PBV.

NEWSBREAK

MMHE announced that it has been awarded 2 contracts. Firstly, a contract from Petronas Carigali Sdn Bhd (PCSB) to undertake the provision of Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) for the Bekok Oil Project. The works include the supply and installation of new BEDP-A and BEDP-B Wellhead platforms consisting of topsides, substructures and bridges linking each of the topside to the existing Bekok-A and Bekok-B platforms. It is understood that the targeted project duration is 9 months. Secondly, a contract from HESS for the Bergading Central Processing Platform Mercury Removal Unit (CPP-MRU) Integration Project. This award covers EPCC works for the Bergading MRU module. The project duration was not disclosed. No contract value was disclosed in the announcement.

HLIB’s VIEW

Replenishing orderbook. We are positive on the announcement. However, no contract value was disclosed. We understand that the Bekok Wellhead platform is similar in size to their recent sail-away (Tembikai). Thus, we estimate that these awards are collectively worth c.RM200-300m. Note that our channel check reveals that Wellhead platforms typically are awarded at RM100-150m per unit.

1-2 CPPs and 5-6 WHPs in 2019. According to Petronas Activity Outlook 2019-2021, Petronas has indicated fabrication work of 1-2 wellhead platforms (WHP) and 1-2 central processing platforms (CPP) to be awarded this year and subsequently, increasing to 6-13 WHPs in 2020. The mini bids will be out by batches depending on PACs working schedule.

Forecast. Unchanged as we have already factored in RM1.0bn in orderbook replenishment for FY20-21.

Reiterate HOLD, TP: RM0.89. Our TP is maintained at RM0.89 pegged to 0.6x FY20 BVPS. We expect MMHE to deliver better results in 4Q19 and turn around in FY20. However we are keeping our HOLD call for now given the run up in share price (YTD 63.3%) and await further signs of continuous improvement in orderbook execution.

Source: Hong Leong Investment Bank Research - 3 Dec 2019