MIDF keeps 'neutral' call on Malaysia Marine

MIDF Research is keeping its neutral call on Malaysia Marine & Heavy Engineering (MMHE), considering the potential earnings contribution from the proposed acquisition of Sime Darby’s Pasir Gudang Yard and joint venture (JV) with Technip to provide hull engineering services on floating structures.

The research house is maintaining the neutral call on MMHE with a target price of RM6.70 per share. As at 12.00 pm, MMHE declined two sen to RM6.62.

MIDF Research reckons that the current valuation has already priced in the fact that MMHE is likely to secure potential sizable contracts like Malikai and Turkmenistan Phase 2 going forward.

"This might cap further an upside in MMHE’s share price. "Most importantly, MMHE has net cash of RM2 billion or RM1.26 per share
with no borrowings at all. The company is well-positioned as an acquirer," the research house said.


Meanwhile HwangDBS Vickers Research revised downward the target price for MMHE to RM6.25 following an earnings downgrade.

HwangDBS Vickers said the proposed acquisition of Sime Darby's yard is currently undergoing an extended due diligence to consider novation of Sime Darby's outstanding book of RM2 billion.

"Should it be concluded by end 2011, it could potentially raise Financial Year 2012 earnings by 14 per cent," it added. -- Bernama