KUALA LUMPUR (July 29): Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) dipped as much as six sen to RM1.12, after the company reported a 55% decline in second quarter net profit from a year earlier.
 
MHB (fundamental: 1.4; valuation: 1.1) is a 66.5%-owned subsidiary of MISC Bhd, which in turn is 62.67%-owned by Petroliam Nasional Bhd (Petronas). MHB shares pared losses at RM1.13 at 10:54am, with 477,100 units changing hands.

Yesterday, MHB said net profit for the second quarter ended June 30, 2015 (2QFY15) fell to RM18.03 million, from RM39.73 million, on lower income from its oil and gas structure construction unit.

The company’s revenue was also down at RM582.14 million, versus RM980.92 million.

Today, Affin Hwang Investment Bank Bhd maintained its "sell" call for MHB shares, with a target price (TP) of RM1.

Affin Hwang also maintained its earnings forecast for MHB.

“MMHE (MHB) had an orderbook backlog of RM1 billion as at end-June 2015, its lowest since its listing. We maintain our earnings forecasts, sell rating and 12-month target price of RM1.00, based on an unchanged 12 times 2016 earnings per share (EPS).

“We believe MMHE will continue to face twin headwinds of low orderbook replenishment and weak profit margins, due to lower upstream capex and stiff competition from (South) Korean and domestic yards,” Affin Hwang said.

Meanwhile, MIDF Amanah Investment Bank Bhd maintained its "neutral" call for MHB shares, with a TP of RM1.27.
 
MIDF said that year-to-date, MHB had secured approximately RM400-500 million worth of new jobs. This is still a far cry from the RM1.7 billion to RM2.9 billion achieved between 2011 and 2013.

“As such, we are reiterating our neutral stance on MMHE, with an unchanged target price (TP) of RM1.27 per share. Our TP is based on our house mid-cap oil and gas service provider target price-earnings ratio (PER) of 14 times pegged to earnings per share (EPS) 2016 of 9.1 sen,” MIDF said.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)