MHB (5186) : MHB faces tough years ahead
Malaysia Marine and Heavy Engineering Holdings Bhd
(Dec 9, RM1.65)
Maintain “fully valued” with target price (TP) of RM1.45. We are now expecting Brent crude oil prices to trend lower going forward, averaging at US$75 (RM261.75)/barrel from our previous assumption of US$95/barrel. Petronas, taking a viewing that low crude oil prices will persist, recently announced that it was cutting its 2015 capex of RM60 billion by 15%-20%. This would make the operating environment for fabricators like MHB even more challenging as there will likely be delays to new jobs and also more pressure on margins given the competitive landscape
MHB’s latest order book, including RM323 million of new jobs secured in October, stands at RM1.7 billion. This represents less than 1 times book-to-bill ratio and will be exhausted by mid-2016 if no further orders are secured. This may result in financial year 2015 (FY15) and FY16 earnings contracting below FY14 earnings. We assume new orders of RM2 billion in FY15 and expect the group to secure mostly smaller jobs going forward and also play subcontractor roles to foreign players like Hyundai Heavy.
We make no changes to our earnings estimates at this juncture as we had cut earnings significantly in October and our estimates are below consensus. However, we are cutting our TP to RM1.45 (16 times FY15 Forecast Price Earnings [PE]) from RM1.65 previously. This is after lowering our target PE to 16 times from 18 times previously. This is in line with trough valuations for the sector. — Alliance DBS Research, Dec 9
http://www.theedgemarkets.com
Malaysia Marine and Heavy Engineering Holdings Bhd
(Dec 9, RM1.65)
Maintain “fully valued” with target price (TP) of RM1.45. We are now expecting Brent crude oil prices to trend lower going forward, averaging at US$75 (RM261.75)/barrel from our previous assumption of US$95/barrel. Petronas, taking a viewing that low crude oil prices will persist, recently announced that it was cutting its 2015 capex of RM60 billion by 15%-20%. This would make the operating environment for fabricators like MHB even more challenging as there will likely be delays to new jobs and also more pressure on margins given the competitive landscape
MHB’s latest order book, including RM323 million of new jobs secured in October, stands at RM1.7 billion. This represents less than 1 times book-to-bill ratio and will be exhausted by mid-2016 if no further orders are secured. This may result in financial year 2015 (FY15) and FY16 earnings contracting below FY14 earnings. We assume new orders of RM2 billion in FY15 and expect the group to secure mostly smaller jobs going forward and also play subcontractor roles to foreign players like Hyundai Heavy.
We make no changes to our earnings estimates at this juncture as we had cut earnings significantly in October and our estimates are below consensus. However, we are cutting our TP to RM1.45 (16 times FY15 Forecast Price Earnings [PE]) from RM1.65 previously. This is after lowering our target PE to 16 times from 18 times previously. This is in line with trough valuations for the sector. — Alliance DBS Research, Dec 9
http://www.theedgemarkets.com
