Thursday, 28 June, 2012

Company Update

End of Dry Season?
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 8,384.0 MK 1,600.0 Equity 8.67 4.67 0.7 25.0% Y Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders MISC Bhd Technip Sa Vanguard Group Inc n.a -7.42% 4.6% 1.2 66.5% 8.5% 1.2%

Price: RM5.24 Target Price: (16.6% downside) RM4.37 Finally, MMHE has Price: out from the contract dry spell moved
with the procurement of the F14/F29 project which consists of the construction of 3 production related structures by Sarawak Shell which worth RM278m. While leading indicator i.e bidding book remain fairly healthy at RM4bn coupled with our positive second half contract flow outlook, our earnings forecast for FY12 and FY13 would still need more contracts boost to materialize as current orderbook size of about RM3.5bn, remain relatively low. Maintain our numbers and Sell call at target price of RM4.37. The contract. The fixed lump sum contract of RM278m entails the provision of procurement, fabrication and yard pre-commissioning of the F14DR-A topside and F14/F29 process module as well as the fabrication of a F14DR-A jacket 4-legged jacket. Estimated completion period is 12 months. The structures are destined for gas fields located offshore Sarawak at water-depth of 320ft. End of dry season. This contract came only after about 7 months since the last contract win back in Nov 2011 thus ending the contract dry season. However, relatively, we still see current orderbook which is estimated at around RM3.5bn (less than 1x of our FY12 revenue estimate) would still need to materially boosted over the next 2 quarters to meet our FY12 and FY13 forecasts. Moving into the rest of the year which we envisaged to be more vibrant as compared to the first half, we expect more fabrication related jobs to be dished out for which may include North Malay Basin cluster marginal fields, Belud, Bumi B and Cakerawala platforms/structures. No change in forecast. We expect the contract to begin contribution in FY12. However, we made no change to our estimates as we had incorporated the contract value into our estimates. Valuation & Recommendation. We retain our Sell call on MMHE with an unchanged target price of RM4.37 based on 20x PER over FY12 EPS of 21.9sen.

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 Pretax margin Effective tax rate ROE ROA Net Gearing (x) Core EPS (sen) Core EPS growth PER (%) (x) DPS (sen) Div. Yield (%) NTA/share (RM) Growth ratios Turnover EBIT Pretax profit Core Net profit Share Price Chart

1mth 8.2% 3.0%

3mth -1.8% -4.8%

12mth -34.8% -37.9%

3/2011 4,435.4 399.6 424.0 450.7

12/2011 2,137.0 204.1 250.8 205.6

2012E 3,865.0 434.1 437.1 349.7

2013E 4,312.3 493.1 493.1 389.6 11.4% 11.4% -21.0% 12.6% 6.9% net cash 24.3 11.4% 21.5 2.4 0.5% 1.93

6.2% 9.0% 9.6% 11.2% 6.1% 9.6% 11.7% 11.3% -24.7% 6.2% -17.9% -20.0% 23.3% 19.6% 8.5% 12.8% 5.8% 9.1% 4.6% 6.9% net cash net cash net cash net cash 17.5 28.2 12.9 21.9 0.3% 61.4% -54.4% 70.1% 30.0 18.6 40.8 24.0 0.0 0.0 10.0 2.2 0.0% 0.0% 1.9% 0.4% 0.76 1.44 1.52 1.71

52.9% 8.9% 8.1% 0.3%

-27.8% 5.0% 12.4% 61.4%

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

80.9% 112.7% 74.3% 70.1%

11.6% 13.6% 12.8% 11.4%

Chiong Tong Chai 03-26918887 ext 175


28 June 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system:

Company Update: MMHE

STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. 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.

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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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