Thursday 28 Mar 2024
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KUALA LUMPUR (Aug 2): Malaysia Marine and Heavy Engineering Holdings Bhd's (MMHE) earnings forecast for financial year ending Dec 31, 2018 (FY18) was revised downwards by both Hong Leong Investment Bank (HLIB) and Affin Hwang Investment Bank to a loss from an earlier profit estimate of RM17.2 million and RM25 million respectively after the group recorded a core net loss of about RM86.1 million in the first half of its financial year (1HFY18).

HLIB's analyst Sean Lim said in his note released today that FY18's earnings forecast was slashed to RM46.1 million losses from a profit estimate of RM17.2 million and reduced FY19's earnings forecast by 20% after increasing higher operating cost for both marine and heavy engineering segments.

He also noted that in the heavy engineering segment, MMHE is only left with one major project, Bokor CPP, which is at 16% completion but the bulk of its earnings would only come in significantly in FY19 as the first steel cut is expected in 3Q18.

"As at end-2QFY18, MMHE's orderbook fell to RM1.1 billion from RM1.2 billion in 1Q18 without major contract secured during the quarter. However, its tenderbook has increased to RM4.3 billion from RM2.8 billion, of which 84% is offshore jobs," he said.

While Lim is expecting the marine performance in the 2HFY18 to improve, benefiting from the deferral of some dry docking activities into this period, he expects the segment to remain in the red for the full FY18.

Affin Hwang IB's analyst Tan Jianyuan also cut his earlier RM25 million profit forecast for FY18 to a RM48 million loss, reflecting a couple of changes.

In his note, Tan said there is a delay in the Bokor project profit and partial recovery in the cost provision recognised.

"The negative impact will be partly offset by better-than-expected marine activities towards the 2HFY18, which will likely narrow the current losses," he said, noting that no changes were made to the group's forecast earnings for FY19 and FY20.

While HLIB's Lim maintained a recommendation to "hold" MMHE with a lower target price (TP) of 78 sen from previously 79 sen, Affin Hwang IB's Tan has downgraded the stock to a "sell" rating from "hold" in view of the heightened uncertainty in the coming quarters. Tan also has a lower TP of 70 sen from his previous 80 sen.

At 10.01am, MMHE fell 8.18% or 6.5 sen to 73 sen with 2.01 million shares done,

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