MMHE has secured RM324m worth of contracts which include:

(i)  A subcontract from Hyundai Heavy Industries for the fabrication of the  Baronia  jacket,  bridge,  piles  and  appurtenance  for  a central  processing  platform.  The  estimated  weight  of  these structural components under MMHE’s scope is 10,736mt and due for sail-away in Mar17;

(ii)  Petronas  Carigali’s  Facilities  Improvement  Project  Package  C. MMHE  will  provide  facilities  improvement  work  that  entails hook  up  and  commissioning,  major  construction  such  as topside  modification,  structural  and  mechanical  retrofit  and other related works and services. The contract tenure is for two years from Jun15 until Jun17 with the option of a 1-year extension;

(iii)  Repair life extension project and dry-docking for two LNG carrier vessels  for  MISC.  The  vessels,  ‘Puteri  Intan’  and  ‘Puteri Delima’  are scheduled to  arrive in Jun15 and completed  by early Sep15; and

(iv)  The conversion of a vessel into a floating, storage and offloading (FSO)  facility  for  E.A.  Technique  that  entails  demolition, refurbishment and installation works. The vessel is expected to arrive at the yard in Jul15 and is targeted for sail-away by end Jun16.  (Source: Bursa Malaysia)

Comments:  The  RM324m  contract  wins  bump  MMHE’s  year-to-date contract  wins  to  RM400m,  which  is  commendable,  but  largely  within  our expectations.  We  forecast  MMHE  to  secure  RM1bn  worth  of  offshore contracts  (RM230m  win  ytd)  and  RM250m  marine  contracts  in  2015 (RM170m  contract  wins  ytd).  No  change  to  our  earnings  forecast,  SELL rating and TP of RM1.00 based on 12x 2016E PE. We believe MMHE will continue to face the twin headwinds of low orderbook replenishment and weaker profit margins due to lower upstream capex and stiffer competition. Any operational hiccups on MMHE’s SK316 and Malikai TLP projects may further weigh down its share price.

Source: Affin Hwang Capital Research - 16 Jun 2015