Published: Friday August 3, 2012 MYT 9:02:00 AM
RHB Research maintains Underperform on MMHE
KUALA LUMPUR: RHB Research Institute is maintaining its Underperform recommendation on Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) and reduced the fair value to RM3.40
It said on Friday MMHE's H1 FY12 net profit of RM133.6mil (down 35.7% on-year) was below expectations as it accounted for only 38% its and consensus full-year estimates.
MMHE's offshore segment generated revenues of RM893.2mil in Q2, FY12. This brought H1, FY12 revenues to RM1.5bil, accounting for only 42% of its FY12 estimates for the division.
In the H1, FY12, the offshore division EBIT margin came in at 7.7% (down 0.5 percentage points on-year), lower than our full-year EBIT margin assumption of 9.5% for the division.
"We understand that the EBIT margin was dragged down by the Kebabangan project, which carries a lower margin of 5%-7%," it said.
MMHE's current order backlog stands at RM2.8bn, the biggest of which are the Kebabangan, Tapis EOR and FPSO Cendor projects, while it is bidding for RM5bil worth of contracts.
"Post-earnings revision, our new fair value is reduced to RM3.40 (from RM3.56) based on unchanged target PER of 15 times FY13 EPS. We reiterate our Underperform call on the stock," it said.