TH Heavy Engineering - Enter another heavyweight investor

Author: value_investor | Publish date: Thu, 25 Sep 10:48 | >> Read article in Blog website






Target RM1.23 (Stock Rating: ADD)

THHE has proposed a placement of up to 10% with the first tranche of 5% to be placed to Pelaburan Mara Berhad (PMB) at 80 sen/share. THHE, which already counts LTH and Tan Sri Quek Leng Chan as its major shareholders, has earmarked the RM42m gross proceeds from the 5% placement for its yard expansion and FPSO venture. We maintain our forecasts for now but flag that we would cut our FY14-16 EPS by 1-4% for a bigger share base following the completion of the 5% placement. We continue to value the stock at a CY15 P/E of 16.4x, a 30% discount to the average P/E of the O&G big caps. A growing order book and a successful FPSO venture are the potential re-rating catalysts. THHE remains an Add and our top pick among the O&G small caps.





What Happened


THHE has proposed a placement of new shares of up to 10%, of which the first tranche of 5% or 52.796m shares will be placed to PMB at 80 sen/share. The gross proceeds of RM42m from the 5% placement will be used to facilitate THHE's yard expansion and floating production, storage and offloading (FPSO) venture. The 5% placement is slated for completion by mid-Oct.



What We Think

Established in 1967, PMB is an investment and asset management company wholly-owned by Majlis Amanah Rakyat (MARA), a government agency. PMB is making an entrance into THHE amidst the latter's operational improvement. To recap, THHE went through a rough patch in 2Q, prompting it to make RM9m provisions for the fabrication and transport & installation businesses. However, we understand that the company has returned to the black in 3Q and aims to secure a sizeable fabrication contract by year-end to expand its order book of RM1.5bn at end-Aug (Figure 1). PMB will be THHE's third largest shareholder, after Lembaga Tabung Haji (LTH) (31.6%) and Tan Sri Quek (9.1%). Imputing the new shares from the 5% placement, we expect to lower our fully-diluted EPS by 1% for FY14, 4% for FY15 and 4% for FY16.



What You Should Do

Accumulate the stock following the recent share price fall brought about by the soft 2Q. The fabrication business is lumpy but we take comfort in the long-term nature of the FPSO business, which landed an 8+10 US$372m contract in May. Furthermore, the stock's valuations are undemanding at 9-13x FY15-16 earnings, lower than the sector average of 14-16x

maggiel cannot wait Q4 ?? , Dylan1027 jz boring and hopeless and cant wait anymore ??? , profithunter holding for long....hope will move and finally cant wait anymore....if you guys answer negative ...please sell to me fast , I want to collect somemore at current price.....

SO MARA BOUGHT 52 MILLIONS SHARES ROUGHLY AT TOTAL PRICE OF RM42 MILLION .

KUALA LUMPUR: CIMB Equities Research has advised investors to accumulate shares of TH Heavy Engineering (THHE) following the recent share price fall brought about by the soft second quarter.

It said on Thursday THHE’s fabrication business was lumpy but it took comfort in the long-term nature of the floating production, storage and offloading (FPSO) business, which involved an eight +10 years US$372mil contract in May.

“Furthermore, the stock's valuations are undemanding at 9.0 times to 13 times FY15-16 earnings, lower than the sector average of 14 times to 16 times,” it said.

CIMB Research issued the report after THHE proposed to place out new shares of up to 10%, of which the first tranche of 5% or 52.796 million shares would be placed to Pelaburan Mara Bhd (PMB) at 80 sen a share

my message invest TH HEAVY....!!! govt will support..!!!

AMANAH SAHAM MARA CONFIRMS BUYING 5% OF TH HEAVY SHARES AND GOIG TO BE ONE OF THE SUBSTANTIAL SHARE HOLDER ....SO TRY COLLECT FAST BEFORE YOU MISSED !!!

I don't think it will fall to 75 next year end and 2016 will be good year for TH as a company and TH investors !!!

If you want 70 to 75 you will never buy.....because th heavy will not reach that low in near future....glotec will be suitable for you only 10 sen...

some mood change due to some reason which I cannot say openly....

15th October it will move higher.....now time to collect....

Joel this what I understood from your mandarin message..

I found a lot of people are very impatient ,
Some stocks really have to wait 2-3 years to see the harvest.
Do not play too much, after all, buy a more stable industrial rental / Anti- INFLATION

sheep ...specially for you u must not invest ....this the message from the 10th largest investor for TH HEAVY .... u shall get lost fast...!!!!

Ameera...thank you...2016 you will see the fruits of your labour..!!! at that time many will say ..."aiyah !! should have bought it 15 month ago !!! mistake lah ..!!!

dragonfruits ....others may lari not kuttyravi !!!

Target RM1.23 (Stock Rating: ADD)




Provisions for two projects caused THHE to slip into a net loss of RM5m in 1H14, falling short of our and consensus estimates. However, the provisions were one-offs and the projects have been completed. We cut our FY14 EPS forecast to reflect these provisions although the company has returned to profitability in 3Q so far and that a write-back in 4Q is possible. We maintain our FY15-16 EPS and continue to value the stock at a CY15 P/E of 16.4x, a 30% discount to the average P/E of the oil & gas big caps. A growing order book and a successful FPSO venture are the potential re-rating catalysts. THHE remains an Add and our top pick among the oil & gas small caps.



A loss-making 2Q
THHE booked a net loss of RM6m in 2Q due to RM9m provisions for the fabrication business (RM6m) and transport and installation (T&I) (RM3m). The provisions were made for the Permas fabrication project and a 92-day drydocking for DB30, a key T&I asset, prior to a project in Brunei. We understand that: 1) the provisions were one-offs, 2) there could be a write-back as early as 4Q, and 3) the company has reversed to the black in 3Q so far. The RM196m Permas project was completed earlier this month, while DB30 finished the job in Brunei last month and is now working in Indonesia.

RM1.5bn order book
The completion of the Permas project reduces THHE's order book to RM1.5bn, with contributions from floating, production, storage and offloading (FPSO) (77.8%), fabrication (21.7%) and cranes (0.5%). The company is on track to finish Lundin's RM120m Bertam wellhead platform project in Nov 2014 and its largest fabrication project to date, Petronas Carigali's RM250m Kinabalu topside project, in Aug 2015.

FPSO offers steady income
To reduce the volatility in earnings given the lumpy nature of fabrication contracts, THHE has ventured into FPSO. In May 2014, it secured an 8-year US$372m FPSO contract, with extension options of up to 10 years, from Nippon Oil for work at Sarawak's Layang gas field. The company targets to clinch its second FPSO contract in 1H15 at the earliest

just until October 15 TH price is on the low range.....time to accumulate....wait after october 15 2014 it will be on uptrend....

off course....already started just now....

anyone panic and cant hold pls sell im collecting.....this low price will continue until October 15 2014...dividen will only come in 2016...

....thank u...Edmund investor...for once somebody talk sense !!!

2016 end may be I let go....

Ameera ...aiyah only 92.5....ameera stay cool ...if u not in hurry be patient...once new project awarded the u can cabut....don't be panic !!! who say u got bad luck ????...

dying is a natural process...then only birth can happen....may be because some people wants me to buy when it fall....infact I wish it fall again...so that I can collect more....please get panic and sell it again ,,,,I will buy...this time please go below 80 sen....im the happiest guy....

for past 3 years I haven't even sold a single unit or shares out of 10 million shares I have , if for some reason price drop I will keep buying !!!....

Tomjerry ...u too explain....I cannot understand !!!...pls explain....I usually deal with someone who spend more than RM2 million for any favourite stock ,,,,,if doesn't work for some people ...may be you guys are not that category ....I guess....

dragonfruits ,pls explain what u mean by u turn when kuttyravi appear?

many of u guys make u turn....not me...the word is "patient"....may don't have it !!!.....so better sell it and play other shares !!!

first lets reach RM 1.00...this is 100% sure...then it will climb to RM1.20....after that it will go beyond that.....even can reach RM2.00 if TH HEAVY gets new projects....

of...will even go beyond RM1.20...wait next year....

Hold on to TH HEAVY shares....first dividen will hopefully get by 2016...

new project coming....wait for the end of this year !!!

basic rule...aiyah not number of times you earn....how much you earn that important.....once I earn equivalent at least 100 times other people earn ( at least 99% of time ) ....big money bring big earning so far...

bsngpg....When old flowers whither new flower will bloom !!!

everybody : lesson of the day... be greedy and be patient....baru boleh kaya !!!

Wait till 2016 then will see some income coming in....if you guys cant cant wait then sell it...(check out this news...http://www.thesundaily.my/news/1077000 )

still around ...any body interested to buy mine ??? 6 million shares selling for RM2 only....then I disappear,,,,ha ha ha

oops sorry ...the price will go back to 90 sen above from 16th JUNE onwards...meantime grab it while its cheap !!!

The price will go back to 90 sen or above from 16th July onwards...meantime grab it while its cheap !!!

just received news from my source Thheavy will announce something on Friday evening and might suspend before the announcement , the news is regarding collaboration between FGV and TH HEavy....stay cool and let see how good is it comes friday....

craptree.... i need to learn from you and others too...

this is the main problem with many retail investors ...if goes up 3 sen they get too excited....when drops 3 sen they start cursing...we need patient investors and if cant wait even 1 year no point investing in this kind of stock....aiyah how to become rich..

i also invest overseas shares like india and other countries and also other shares in malaysia like klccp and others but i rarely disclose....

already grab some at 89.5 sen will continue monday , hoping for further drop as long as below RM1 will collect...any takers pls start throwing...

end next week you guys throw i will grab even at 95 sen....

finally i realised not easy to look for someone through FB...I unable to get seetan2006....why not send me your link to revianu@hotmail.com

Tell me your FB name , i will connect you from there.....

under FB you will see profile picture me and bull sculpture under ravi kumaran

WY Chan , my FB under Ravi Kumaran...though old profile picture...

WY Chan , TH HEAVY will improve , if not 2014 will surely be by dec 2015 will see best performanec....they spending substantial capital for new projects execution...

WY Chan , we need more investors like you , who got stamina to hold on to their shares and need patient , i know sometimes is frustrating but good things most of the times comes slowly and suddenly !!!! FPSO is slowly but surely !!!!...so , be patient !!! if you investors cannot wait dont play shares at all !!!

in summary.....“In less than 12 months, Tan Sri Quek Leng Chan, along with parties associated with him have acquired substantial stakes in two Bursa-listed oil and gas service providers – TH Heavy Engineering Bhd and Alam Maritim Resources Bhd (not rated).

“We believe that there could possibly be more acquisitions and possible mergers on the horizon, instigated by Tan Sri Quek and his associates,” Tan opined, pegging this theory as the research firm’s ‘Mosaic Theory’ and noted that it is still subjected to ‘the test of time’.

Overall, the research firm pegged a positive stance on the sector as positive sentiment is expected based on potential M&As to continue to spur investors’ interest in Bursa-listed O&G service providers.