MMHE may face difficult times ahead due to increased competition: RHB Research

KUALA LUMPUR: In light of the reopening of China's yard, Malaysia maritime & Heavy Engineering Holdings Bhd (MMHE) may experience softer times ahead for its maritime business due to fierce competition.

According to RHB Research, the company currently uses between 50 and 80 per cent of its dry docks.

In the fourth quarter of 2023 (Q4 2023), company secured an offshore windfarm project, with visibility to the financial year 2027 (FY27). As a result, its orderbook was at RM6.3 billion.

"However, project execution of its orderbook needs to be monitored given its recurring cost provisions. Its tenderbook stands at RM6-7 billion, with a 50:50 split between domestic and international jobs. 

"Moving forward, MMHE is looking to balance its portfolio between oil and gas and renewable energy opportunities," it said in a note. 

For FY23, the company recorded a core net loss of RM490.1 million, which was against RHB Research's and consensus' full-year forecasts of RM147.9 million and RM132.3 million losses. No dividend was declared for the quarter, as expected.  

The net loss was  driven by unceasing cost provisions even though revenue doubled year-on-year (YoY) to RM3.3 billion. 

The revenue increase can be attributed to higher project billings from the heavy engineering (HE) division. 

For Q4 2023, the group turned profitable with a core net profit of RM9.4 million as the HE segment recorded pre-tax earnings of RM7.4 million.

As of Q4 2023, MMHE is back to its net cash position of RM190 million, which translates to 12 sen per share. 

"We lower our FY24–25 forecast by 5.2-10.4 per cent on account of ongoing cost provisions as well as introducing FY26 earnings," it said. 

RHB Research maintained 'buy' on the stock with a target price of 57 sen as the group's book value per share fell to 83 sen from RM1.04 given its accumulated losses. 

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