KUALA LUMPUR: Maybank Investment Bank Research has upgraded Malaysia Marine Heavy Engineering (MMHE) to a Buy ahead of a recovery in order backlog.
It said on Thursday MMHE is more solid, financially and operationally now versus a year ago.
“Valuations are near their historical low from a price-to-book value (PBV) perspective and lag behind regional peers that have re-rated, on rising oil price/ sentiment/ activity,” it said.
Maybank Research said its new TP of RM1 (+25sen) is based on a 0.9x enterprise value (EV)/ order backlog (versus 0.5 times PBV previously) to reflect the improving outlook, and offers a 22% upside,” it said.
Commenting on the fourth quarter results (Q4FY17), it said the surprise net profit of RM48mil included a RM94mil gain, largely comprising substantial variation orders (RM70mil).
Excluding that, MMHE reported core net loss of RM46mil, bringing its core loss to RM61mil in FY17. The heavy engineering operations reported higher on-quarter activities.
Conversely, its marine operations reported lower revenue/ EBIT (-12%/ -29%) on lower volume/ value of marine repair works. Financially, its cash balance improved 10% on-quarter to RM675mil @ 42sen a share.
MMHE reported positive free cashflow of RM10mil and declared an interim DPS of 3 sen, a positive surprise.
“The weak FY18 is well-flagged, on a RM1.3bil order backlog (one-year visibility). Financially, MMHE is on a firmer footing, from a cashflow/opex management perspective.
“Operationally, we expect MMHE’s job wins momentum to improve this FY, on improving sentiment/ activities. It has started tendering for jobs beyond the domestic market, a positive aspect, in terms of competitiveness. We expect MMHE to win RM2bil worth of works in FY18 (vs. RM1.1bil in FY17).
@bleuerouge: Yeah that's why I'm interested in this company, good cash flow with 0 borrowings, I expect it could bring more positive news to the company. Meanwhile I guess those who look into Sapura mainly becuz of one good news: they probably won't get another result worst than the current one, but the down side is if sapura started earning money.. the group will eventually repay their debts instead of paying back to shareholders, so yeah if we had like 10-20 years sapura worth to buy for us small investors imo.
Q1 18 not necessarily good. It is the much improved macro conditions that will drive MMHE's recovery going forward. Losing out on Pegaga is a big loss...but MMHE will now be in a pole position to grab the next major EPCIC contract to be issued in Malaysia.
Yeah, with the decline of revenue in Marine business unit (MBU) would be a downside, but the CEO said they have secured a number of offshore fabrication projects so which is probably still bringing decent revenue to the company this year, with the oil price sustain around $60-70 so I guess the company still have a good prospect in the near future.
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SEED
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Posted by SEED > 2018-02-07 16:35 | Report Abuse
I have been waited for so long, finally got dividend...haha