MHB (5186) : Affin Hwang Research maintains Sell on MMHE
KUALA LUMPUR: Affin Hwang Research has maintained its Sell rating on MMHE with a lower target price of RM1.15 from RM1.50, pegging the stock at 12 times 2015 PE from 15 times.
In a note on Thursday, the research house said the target PE of 12 times in comparable to -1 standard deviation PE of 11.5 times.
"We opine that the potential entrance of South Korean yard would permanently change the local fabrication landscape, pressure margins and reduce the appeal of MMHE. Also, MMHE’s weak YTD contract wins, low orderbook backlog and the weak oil price will further weigh down its share price," it said.
It added that MMHE, a pure domestic fabricator with single business focus, is hit by a double whammy of higher competitions (entrance of South Korean yard and SAKP’s dominance in local market) and weaker domestic oil & gas capex.
It said that the group has secured a mere RM323mil contracts year-to-date, significantly lower than its RM1.7bil to RM2.9bil contract wins in 2011-2013.
The contract awards to the South Korean yards signalled that Petronas is now highly focused on cost control while SAKP’s strong performance this year could be due to its integrated operation and strong management team.
"While we expect MMHE to secure some RM1.2bil-RM1.5bil worth of contracts per annum in 2015-16E, we opine that its bids will need to be highly competitive and hence, its profit margins may come under pressure," it said.
http://www.thestar.com.my
KUALA LUMPUR: Affin Hwang Research has maintained its Sell rating on MMHE with a lower target price of RM1.15 from RM1.50, pegging the stock at 12 times 2015 PE from 15 times.
In a note on Thursday, the research house said the target PE of 12 times in comparable to -1 standard deviation PE of 11.5 times.
"We opine that the potential entrance of South Korean yard would permanently change the local fabrication landscape, pressure margins and reduce the appeal of MMHE. Also, MMHE’s weak YTD contract wins, low orderbook backlog and the weak oil price will further weigh down its share price," it said.
It added that MMHE, a pure domestic fabricator with single business focus, is hit by a double whammy of higher competitions (entrance of South Korean yard and SAKP’s dominance in local market) and weaker domestic oil & gas capex.
It said that the group has secured a mere RM323mil contracts year-to-date, significantly lower than its RM1.7bil to RM2.9bil contract wins in 2011-2013.
The contract awards to the South Korean yards signalled that Petronas is now highly focused on cost control while SAKP’s strong performance this year could be due to its integrated operation and strong management team.
"While we expect MMHE to secure some RM1.2bil-RM1.5bil worth of contracts per annum in 2015-16E, we opine that its bids will need to be highly competitive and hence, its profit margins may come under pressure," it said.
http://www.thestar.com.my
