KUALA LUMPUR (Aug 4): Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) is expected to start registering profit in the next financial year, backed by its RM1.6 billion orderbook, RHB Research Institute Sdn Bhd said.

MHB, which builds land and marine structures, is also an oil and gas support service provider. RHB analyst Wan Mohd Zahidi said most of MHB's projects would be delivered from financial year ending Dec 31, 2018 (FY18) and that its marine business remained strong. 

"We do not expect MMHE (MHB) to register good earnings in FY17. However, we believe value is starting to emerge. We caution that MMHE’s value may not emerge overnight, but we believe that from a valuation standpoint, it is trading at an all-time low, with upside potential. 

"At P/BV of 0.45x, it is currently trading at a 79% discount to its historical P/B average of 2.2x," Wan Mohd Zahidi said. He said RHB upgraded MHB shares to "buy" from "neutral", with a revised target price at 90 sen. At 11:12am today, MHB shares were traded at 70.5 sen.

RHB's note today followed MHB's 2QFY17 results announcement yesterday.

MHB said 2QFY17 net loss widened to RM13.7 million, from a net loss of RM2.56 million a year earlier. 1HFY17 net loss widened to RM30.31 million, from a net loss of RM10.14 million a year earlier

Today, Kenanga Investment Bank Bhd analyst Sean Lim Ooi Leong said MHB's 1HFY17 core net loss at RM9.8 million was below Kenanga's and consensus full-year net profit forecast at RM10.9 million and RM22.1 million respectively.

Lim said MHB's core net loss excluded unrealised foreign exchange and hedging instrument fair value losses.

"In all, we maintain underperform call on the stock with a lower target of 65 sen, in view of limited job prospects within the fabrication space, given cautious capex (capital expenditure) spending from oil majors," Lim said.