Wednesday, 28 March, 2012

Lifted Up
Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant MMHE 8,640.0 MK 1,600.0 Equity 8.82 5 1.3 25.0% Y Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders Misc Bhd Technip Sa Vanguard Group Inc n.a -4.59% 3.7% 1.2 66.5% 8.5% 1.1%

We were in Johor to witness the Superlift of the 40k tonnes Gumusut-Kakap Floating Production System (GK FPS) in MMHE’s Pasir Gudang yard and were amazed by the giant production facility which ranks amongst the largest in the world. Completion is scheduled in 1Q13 providing some relief on initial concerns of further delay. Maintain SELL with target price unchanged at RM4.76. Hitting the mark. The much awaited Superlift stamped a significant milestone for the project and alleviates the concern of further delay. With the construction of the FPS divided into two parts i.e the Hull and the Topside, Superlift is engaged to lift up the Topside which is now 45m above ground allowing the hull to be integrated to the bottom part of the Topside. This also means the project is now post-peak and completion is targeted in 1Q13 with potential delay penalty remains as a question mark. A giant. The FPS which is capable of handling 150k bbl of crude and 300mmscf of gas is owned by MISC and will be leased to the GK project under a 20+10 years term. Hydrocarbons produced which we understand could potentially meet 1/3 of domestic demand will go through basic processing in the facility before being transported via sub-sea export pipeline to Sabah Oil and Gas Terminal (SOGT) for further processing. With design life of 30 years, the re-deployable FPS could potentially turn into a production hub for nearby fields. By current industry standard, the facility is amongst the largest by tonnage for both its Topside and Hull. Replicable. Completion of this project which is the first one for a Malaysian yard could in our view improve MMHE’s chances in securing the Malikai platform rd project which result likely to be announced by 3 quarter. Nevertheless, pricing would remain as a critical factor and it remains to be seen how low MMHE is willing to go for the contract which is likely to be a lump sum contract. For now, the yard is practically operating in full capacity and could only accommodate the next fabrication job after GK FPS is loaded out. Valuation & Recommendation. Though we are positive on this project, MMHE’s prospects over the immediate term prospects remains unexciting hence maintaining our earnings forecast and retain our Sell call with a target price of RM4.76 based on 20x PER over FY12 EPS of 23.8sen.

Price: Target: Price:

RM5.40 RM4.76

Share Performance (%) Absolute vs. KLCI Financial Highlights FYE 31 Dec 3/2010 Turnover 6,147.0 (RMm) EBIT 380.7 Pretax profit 377.2 Core Net Profit 279.2 EBIT margin 6.2% Pretax margin 6.1% Effective tax -24.7% ROE 23.3% rate ROA 5.8% Net Gearing (x) net cash Core EPS (sen) 17.5 Core EPS 0.3% PER (x) (%) 30.9 growth DPS (sen) 0.0 Div. Yield (%) 0.0% NTA/share (RM) 0.76 Growth ratios Turnover EBIT Pretax profit Core Net profit Share Price Chart

1mth 1.3% -0.7%

3mth -5.3% -10.3%

12mth -19.5% -23.9%

3/2011 4,435.4 399.6 424.0 450.7 9.0% 9.6% 6.2% 19.6% 9.1% net cash 28.2 61.4% 19.2 0.0 0.0% 1.44

12/2011 2,137.0 204.1 250.8 205.6 9.6% 11.7% -17.9% 8.5% 4.6% net cash 12.9 -54.4% 42.0 10.0 1.9% 1.52

2012E 3,927.7 472.9 475.9 380.7 12.0% 12.1% -20.0% 13.8% 7.5% net cash 23.8 85.2% 22.7 2.4 0.4% 1.73

2013E 4,792.6 574.1 574.1 453.6 12.0% 12.0% -21.0% 14.3% 7.5% net cash 28.3 19.1% 19.0 2.8 0.5% 1.99

52.9% 8.9% 8.1% 0.3%

-27.8% 5.0% 12.4% 61.4%

-51.8% -48.9% -40.8% -54.4%

83.8% 131.7% 89.7% 85.2%

22.0% 21.4% 20.6% 19.1%

Chiong Tong Chai 03-26918887 ext 175


28 March 2012

Company Update: MMHE

Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months The stock is expected to perform ahead of the market in the next 12 months The stock is expected to outperform the market in the next 3 months The stock is expected to perform in line with the market in the next 12 months The stock is expected to underperform the market in the next 3 months An expected price depreciation of more than 10% in the next 12 months

SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analyst’s coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analyst’s coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analyst’s coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262

Kenny Yee Head of Research


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