Hot Stock MHB gains 3.45% after securing RM324m projects

by **Cals** Tue 16 Jun 2015, 20:51

Hot Stock
MHB gains 3.45% after securing RM324m projects

KUALA LUMPUR (June 16): Malaysia Marine and Heavy Engineering Holdings Bhd ([You must be registered and logged in to see this image.] Financial Dashboard)'s (MHB) share price surged as much as four sen or 3.45% in the morning trades after the group clinched four jobs worth RM324 million yesterday.
At 10.44am, the stock was traded at RM1.20, with some 983,800 shares were seen having been traded.
Year-to-date, the offshore and marine services provider's share price has lost 55 sen or 31.43%, underperforming FBM KLCI's 1.54% decline.
According to The Edge Research, MHB (fundamental: 1.4; valuation: 1.1) was traded at 14.1 times of its price to earnings ratio (P/E).
Yesterday, MHB announced that it had bagged four contracts with a collective value of RM324 million, which will last the group until June 2017.
The contracts secured involve offshore structural component fabrication works, hook-up and commissioning, related topside construction works for facilities improvement projects, as well as marine repair and conversion works.
Despite the new winning, Maybank Investment Bank Bhd (MIBB) said in a note on Tuesday that the replenishment rate is weak as it make up just 23% of last year's RM1.5 billion.
"This is not surprising, for it reflects slowdown of activities at yards worldwide as oil companies cut capital expenditure (capex), delay projects, or review plans," it added.
It pointed out that platform rigs builders such as MHB, which are categorised in the exploration-development phase of the oil and gas (O&G) value chain, were most sensitive to these setbacks.
MIBB said 2015 will be a challenge for offshore builders like MHB as it faced replenishment risk and margin pressure.
"Whilst current tender bids of RM7 billion appear to be big, majority of the project awards, in our view, are likely to be pushed back to 2016," it said.
In addition, MIBB added the likelihood of securing a major win overseas looks remote for now.
Meanwhile, MIDF Amanah Research said with these new projects, the group's current order book should be approximately RM1.3 billion.
"The bulk of the backlogs are from the Tension Leg Platform (TLP) Malikai and SK316. There are also ongoing jobs from the Besar-A platform and Bergading CPP," it added.
According to MIDF, it said MHB is currently bidding for approximately RM3 billion worth of jobs, the majority consisting of international Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) jobs.
"Given the comparatively weaker Malaysia Ringgit to the US dollar, MHB will be more competitive in its international bids," it said.
MIDF has maintained its Neutral call on MHB with an unchanged target price of RM1.27 per share, given the modest anticipated earnings outlook and stabilising global crude oil prices.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)