20250528 Malaysia Marine & Heavy Engineering

Maintain BUY and MYR0.62 TP, 68% upside. Malaysia Marine & Heavy Engineering’s results are in line with our expectations, as the stronger marine segment helped cushioned the lower revenue of the heavy engineering (HE) division. We remain positive on the group’s outlook – given its strong orderbook, underpinned by its growing involvement in the clean energy and low-carbon sectors. MMHE’s robust project pipeline, coupled with improved contract terms, should support its sustained profitability. 

MMHE's results met our expectations but missed the consensus estimate. Its core profit of MYR16m accounted for 25% and 16% of our and Street fullyear forecasts. No dividend was declared for the quarter. 

Results review. Revenue fell to MYR453.1m (-45% QoQ, -54% YoY) mainly due to lower project billings from the HE division. The decline was attributed to several ongoing projects nearing completion, which led to reduced activity, while newer projects remained in their early stages. Consequently, the HE segment’s operating profit plunged by 90% QoQ to MYR2.2m. Offsetting this was the stronger performance of the marine segment, which recorded operating profit of MYR17.4m (2.5x QoQ, +26% YoY). MMHE remains in a net cash position, with MYR196m (MYR0.12/share). 

Outlook. As of 1Q25, the group’s orderbook stood at MYR5.3bn (flat QoQ), with new contract wins offsetting order recognition.  Key awards include the EPCIC contract for the fabrication of two wellhead platforms for Vestigo, which is currently 14% complete and scheduled for handover in 1Q26. Other ongoing projects include the Kasawari carbon capture and storage (CCS) project (62% complete), the Joint Development Area (JDA) Field Development Project (90% complete), and the OSS HVDC platform project (4% complete). Its tenderbook of c.MYR6bn is split by 80:20 between international and domestic projects, and diversified across job types ie offshore fixed facilities (38%), wind farm (24%), onshore (16%), and floaters (22%). For the marine business, it anticipates sustained strong performance with current utilisation rate of DD1, DD2, DD3 and land berth at 99%, 87%, 80%, and100%. 

Keep BUY. We maintain our earnings forecasts, as results are in line, although potential upside may stem from the further recognition of outstanding claims. Our TP remains at MYR0.62, which is pegged to 0.7x FY25F P/BV (+1.5SD from the 5-year mean) with a 4% ESG incorporated. MMHE’s ESG score of 2.8 out of 4 is below the country median of 3.  

Key downside risks include slower order replenishment, higher-thanexpected material costs, and labour shortages. 






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