Pending the transfer of SDE's employees to MMHE, seems they have too much on the plate right now....
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The research house noted that MMHE's orderbook was filling up more slowly than expected, thus indicating it was not necessarily the fabricator of choice for national oil giant Petroliam Nasional Bhd and even MMHE's parent MISC Bhd.
“MMHE's orderbook has shrunk from RM5.95bil in June 2010 to RM3.7bil currently,” it said.
CIMB Research also said that two widely anticipated major contracts, Turkmenistan's Block 1 Phase 2 project and Shell's Malikai project, might not be awarded so soon and may not go to MMHE.
Shrinking orderbook: A file picture shows works being carried out at the MMHE shipyard. MMHE’s orderbook is filling up more slowly than expected.
On the Malikai project, CIMB Research said it did not help that MMHE was behind schedule in completing Shell's Gumusut-Kakap floating production system.
“Furthermore, we think that it is only a matter of time before the merged entity of SapuraCrest Kencana Petroleum Bhd matches MMHE's fabrication capacity, especially given the delay in the acquisition of Sime Darby's yard.”
It was also pointed out that MMHE's stock was the most expensive in CIMB Research's oil and gas portfolio despite a three-year earnings per share compounded annual growth rate (EPS CAGR) of minus 11.5%, which was a stark contrast to the sector average of 20.3%. Bumi Armada Bhd, Dialog Group Bhd and Kencana Petroleum Bhd boast 27% to 33% three-year EPS CAGR.
The expected fall in MMHE's earnings would buck the broader sector's uptrend. “We think that investors would prefer companies with more solid and long-term orderbooks (Bumi Armada, Dialog, Kencana and SapuraCrest) and hold back from buying MMHE until there is a substantial improvement in its earnings prospects,” CIMB Research said.
It has an “underperform” call on the company's stock, with a target price of RM4.82.
MMHE shares were down 14 sen to RM5.46 yesterday.
Source: The Star
by Thomas Huong
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