Business

Thursday February 23, 2012

Cautious outlook on MMHE

By CHOONG EN HAN
han@thestar.com.my


Analysts warn on slow order wins

PETALING JAYA: Given Malaysia Marine and Heavy Engineering Holdings Bhd's (MMHE) sluggishness in bagging new jobs, analysts are cautious about the company's earnings outlook.

HwangDBS Vickers Research said delays in the Gumusut-Kakap project could hinder its chances of securing more contracts.

“We remain cautious of MMHE's earnings outlook given the slow order book replenishment. There is no sight of major order wins in the near term, as the Malikai and Turkmenistan phase 2 projects may not materialise this year,” it said after attending an analysts briefing by the marine and heavy engineering services provider.

The Petronas-controlled company's earnings for the quarter ended Dec 31, 2011 stood at RM46.6mil, a 65% decline year-on-year, due to the completion of Turkmenistan's Block 1 Phase 1 contract and the delay in the construction of Shell's Gumusut-Kakap floating production system (FPS).

CIMB said the construction of Shell's Gumusut-Kakap FPS remained in a rut, while work on the Cendor floating production, storage and offloading unit was running slightly behind schedule.

“The Gumusut-Kakap FPS was initially planned for completion by the second quarter of fiscal year 2012 but may be extended until early 2013. Late delivery could result in a penalty, which management has provided for.

“A completion of the structure by the second quarter of fiscal year 2012 could have relieved 20-25% of the Pasir Gudang yard's space and capacity with the yard running at full utilisation currently,” it said.

It also said the RM394mil acquisition of the Sime Darby yard could be finalised as early as 2Q12.

“MMHE is still in talks with Sime. The main talking point is Sime's order book, in particular the RM1.15bil Kebabangan project that was awarded in April 2011, a month before MMHE announced the yard acquisition,” it said.

It said the project is 15% completed and was scheduled to be delivered by end-2013 or early 2014 and had yet to be decided if Sime would continue working on the ongoing projects or if MMHE would take them over.

“When completed, the acquisition will increase MMHE's yard space from 372 acres to 488 acres,” it said.

Meanwhile, OSK Research pared down its 2012 earnings forecast by 10% to reflect a potential delay in the recognition of work down as well as potential cost overrun, especially if the projects secured are new to MMHE and the fabrication structure, including the level of technology required, needs to be specific to a customer's needs.

The company closed eight sen lower yesterday at RM5.43 with 1.68 million shares traded.

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