16 June 2015 | Corporate update

Malaysia Marine & Heavy Engineering Maintain NEUTRAL

Close to RM400m new jobs secured for FY15 Maintain Target Price (TP): RM1.27

INVESTMENT HIGHLIGHTS
• Malaysia Marine & Heavy Engineering (MMHE) announced
RETURN STATS
a slew of contracts worth RM324m.
Price (15 June 2015) RM1.16
• The contracts consist of fabrication works, facilities
improvement works and vessel conversion & repair works. Target Price RM1.27
• Close to RM400m worth of new jobs secured for the year.
Expected Share Price
+9.4%
• Maintain Neutral on MMHE with TP of RM1.27. Return

Expected Dividend Yield -

Four contracts announced. MMHE has announced a slew of
contracts worth approximately RM324m. Year-to-date, the company
Expected Total Return +9.4%
has secured close to RM400m worth of new jobs. The new contracts
include offshore structural component fabrication works, hook up and
commissioning and related topside construction work for facilities
improvement project and marine repair and conversion works. STOCK INFO

Baronia CPP-B project. The first contract is for the fabrication of KLCI 1,722.16
substructure and bridge for the Baronia CPP-B project. MMHE’s will act
Bursa / Bloomberg 5186 / MMHE MK
as the subcontractor for Hyundai Heavy Industries for the ultimate
client, Petronas Carigali. The project is expected to be completed by Board / Sector Main/ Industrial
March 2017.
Syariah Compliant Yes
Facilities improvement project. As the for the second win, MMHE
will act as the contractor for Petronas Carigali for the Facilities Issued shares (mil) 1,600.0
Improvement Project Package C involving offshore operations in Par Value (RM) 0.50
Peninsular Malaysia. MHHE’s scope of works include facilities
improvement work, hook up and commissioning, major construction Market cap. (RM’m) 1,861.0
such as topside modification, structural and mechanical retrofit and
Price over NA 0.75x
other related works and services. The contract duration is for two
years from June 2015 until June 2017 with an option of a 1-year 52-wk price Range RM1.06 – RM3.83
extension on a call-out basis.
Beta (against KLCI) 1.53
Vessel repair. The third project announced is for the repair life
extension project and dry-docking of two LNG carrier vessels for MISC, 3-mth Avg Daily Vol 1.48m
namely ‘Puteri Intan’ and ‘Puteri Delima’. The scope of work involves
3-mth Avg Daily Value RM1.8m
reinforcement work, retrofitting and boiler repair among others. Both
vessels are scheduled to arrive in June 2015 and complete by early Major Shareholders (%)
September 2015 this year.
MISC Bhd 66.50
Vessel conversion. The final contract is the conversion of a vessel
into a FSO facility for E.A. Technique (M) Berhad. The vessel is Lembaga Tabung Haji 6.06

expected to arrive at the yard in July 2015 and is targeted for sail-
away by end June 2016.

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Kindly refer to the last page of this publication for important disclosures
 MIDF RESEARCH
Tuesday, 16 June 2015

Orderbook update. With these new projects, the group’s current orderbook should be approximately RM1.3b. The
bulk of the backlogs are from the TLP Malikai and SK316. There are also ongoing jobs from the Besar-A platform and
Bergading CPP. The group is currently bidding for approximately RM3b worth of jobs, the majority consisting of
international EPCIC jobs. Given the comparatively weaker MYR to the USD, MMHE will be more competitive in its
international bids.

Dividends. The management had previously guided that there will be no dividends this year. We believe that cash
conservation is crucial for the company in these trying times. As at end-March 2015, MMHE has managed to increase
its cash by RM315m. The increase is largely due to the improvement in cash from operating activities and the
reduction in purchase of new plants and machineries.

Maintain NEUTRAL. Given the modest anticipated earnings outlook and stabilizing global crude oil prices, we are
maintaining our Neutral recommendation for MMHE with an unchanged TP of RM1.27 per share. Our target price is
based on house mid-cap oil and gas service provider target PER16 of 14x pegged to EPS16 of 9.1sen.

INVESTMENT STATISTICS
FYE Dec FY12 FY13 FY14 FY15F FY16F
Revenue (RM’m) 3,329.8 2,884.5 2,700.5 2,579.8 2,509.6
EBIT (RM’m) 242.8 196.3 122.6 123.0 132.7
Pretax Profit (RM’m) 217.7 197.6 119.1 123.0 132.7
Net Profit (RM’m) 242.0 236.5 129.9 135.4 146.1
EPS (sen) 15.1 14.8 8.1 8.5 9.1
EPS (%) 17.5 -2.0 -45.3 4.5 7.9
PER (x) 7.7 7.8 14.3 13.7 12.7
Net Dividend (sen) 10 5 0 0 0
Net Dividend (%) 6.3 4.8 0 0 0
Source: MIDFR

DAILY PRICE CHART

Aaron Tan Wei Min

aaron.tan@midf.com.my
03-2772 1650

Source: MIDFR, Company

2
 MIDF RESEARCH
Tuesday, 16 June 2015

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(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)

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MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS

STOCK RECOMMENDATIONS

BUY Total return is expected to be >15% over the next 12 months.

Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been
TRADING BUY
assigned due to positive newsflow.

NEUTRAL Total return is expected to be between -15% and +15% over the next 12 months.

SELL Total return is expected to be <-15% over the next 12 months.

Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been
TRADING SELL
assigned due to negative newsflow.

SECTOR RECOMMENDATIONS

POSITIVE The sector is expected to outperform the overall market over the next 12 months.

NEUTRAL The sector is to perform in line with the overall market over the next 12 months.

NEGATIVE The sector is expected to underperform the overall market over the next 12 months.