MHB (5186) - MMHE looks abroad
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| Abu Fitri: ‘We are hoping to land one big project at least by early next year.’ |
PETALING JAYA: Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), an oil and gas (O&G) services provider, is clearly facing challenging times, considering its depleting order-book and a need to increase the utilisation of its massive fabrication yard in Johor.
Like several other O&G services providers, MMHE’s share price has been on a downward spiral. The company saw its shares traded as low as RM1.07 last month, down 66% from a year ago, losing about RM4.1bil in market value during that period.
The company was listed on Bursa Malaysia in 2010 at a price of RM3.61.
But the Petronas-controlled company is currently sitting on a healthy balance sheet with total borrowings of RM265mil, and cash and cash equivalent almost double that at RM589.23mil.
Sitting on a net cash position puts the company on a strong footing to bid for jobs, which it feels will start flowing again.
Currently, MMHE’s order-book stands at RM1.9bil, which will keep the company busy up to the third quarter of next year. But the fabricator is confident of building up its order-book soon.
After a drying up of jobs due to the plunge in oil prices from the fourth quarter last year, MMHE’s newly appointed head honcho Abu Fitri Abd Jalil believes that the worst is over for the sector.
He said the way to move forward was to widen the company’s profitability by bidding for more international projects.
“We are hoping to land one big project at least by early next year. The most challenging part right now is to keep our staff busy, because we are expecting the sector to be better next year.
“We want to maintain our current staff strength and our third-party contractors. If we don’t do that, then when we do win a big job, we don’t have the people to support it,” he told StarBiz.
Abu Fitri conceded that last year the company had to cut about 20% of its manpower to cope with the challenging environment.
For this year, he said MMHE would be focusing on smaller engineering jobs to keep its current workforce busy as well as widening the search for contracts beyond Malaysian waters.
“At difficult times we have to go for smaller jobs, because a lot of big projects are expected to be delayed by about nine months to a year. My priorities for this year is to ensure our yards keep running.
“We are also bidding for about RM4.5bil worth of projects in the overseas market, especially in the Middle East and Africa, for both offshore and onshore projects,” he explained, adding that the company was also in talks on Petronas’s Canadian plans.
MMHE, which offers engineering, procurement to construction, installation, hook-up and commissioning of oil and gas offshore structures and modules, runs the largest O&G fabrication yard in South-East Asia.
The yard is located in Pasir Gudang, Johor, and has a capacity of 130,000 MT, with a total area of 197.4ha.
Abu Fitri said the current utilisation of the yard was down to about 50% from 75% in early 2014.
MMHE’s fourth-quarter profit fell almost 84% year-on-year to RM16.84mil as many ongoing projects were at their tail end. Revenue dropped 30% to RM508.34mil.
Its biggest customer is Petronas, which had announced previously plans to cut its capital expenditure this year by 20% to 30%.
Abu Fitri said although Petronas was the company’s biggest client, it only accounted for 16% to 17% of MMHE’s total revenue.
“Moving forward, we need to take up the challenge to be more competitive in our pricing to help our clients cut down their costs,” he said.
An analyst noted that the fabrication business is a major sector in the O&G industry, which is always in demand but added that it is highly reliant on the exploration and production contracts and is also a highly competitive arena.
A bulk of MMHE’s revenue came from its offshore business unit, which is mainly involved in the construction of offshore production platforms, while the remaining is its marine business, which is doing ship repairing and conversion.
“It is a right time for us to focus on our business, and build our capabilities and our internal talent. Once the market picks up we would be in a better position,” Abu Fitri said.
According Abu Fitri, the company is also pursuing several local jobs amounting to RM2.5bil, which include the Refinery and Petrochemicals Integrated Development project in Pengerang, Johor, for structure and piping fabrication projects.
http://www.thestar.com.my
