MMHE; Fully Valued; RM4.18
Price Target: RM3.30; MMHE MK

PETRONAS announced it has awarded the engineering, procurement, construction, installaion and commissioning (EPCIC) contract for the development of 2 gas fields (NC3, NC8) in Block 316, offshore Sarawak to Technip-MMHE JV which has submitted the most competitive bid, beating Berlian McDermott Sdn Bhd and SAIPEM (M) Sdn Bhd.

There is no disclosure on the contract value and completion timeline but it is believed to be the biggest platform-based EPC job to be awarded this year in Malaysia as the job was reported to be worth up to US$1bn. The first phase of the multi-platform project is scheduled to be completed by late 2015 where NC3 discovery will host a central processing platform while NC8 is expected to come on stream 4 years later.

This is MMHE’s second contract win this year after securing the US$775m Malikai job with Technip in Feb13, beefing up its outstanding order book to ~RM3bn. We believe that a stronger order book replenishment is still required to sustain its earnings given that most of its projects will be completed by year end. We assumed RM2bn and RM2.5bn new wins for FY13 and FY14, respectively.

We maintain our forecast for now pending clarification on the contract details. We maintain our Fully Valued rating and RM3.30 TP (based on 22x FY14 EPS). Current valuation of 25x FY14 PE appears excessive.

Source: HwangDBS Research - 30 Sep 2013