Malaysia Marine and Heavy Engineering Holdings Bhd (Nov 8, RM6.09)
Maintain neutral at RM6.09 with fair value of RM6.60: Last week, Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) said its 100%-subsidiary, Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE), had signed a contract worth about RM1.4 billion as part of the Tapis Enhanced Oil Recovery (EOR) project with ExxonMobil Exploration and Production Malaysia Inc. The scope of work includes procurement, fabrication, testing, load-out, transport, installation and commissioning of the integrated Tapis R offshore platform deck as well as two inter-platform bridges. This project is expected to be completed by end-2013.
The Tapis field lies about 190km off Terengganu at a depth of 64m. It produces an extra light and low-sulfur crude which once served as the benchmark for pricing oil cargo in Australia, Indonesia and Vietnam. According to our secondary research, this field is one of seven mature offshore fields that ExxonMobil (78%) and Petroliam Nasional Bhd (Petronas — 22%) have agreed to develop as part of a 25-year production-sharing contract (PSC) finalised in June 2009. The other six fields are Seligi, Guntong, Semangkok, Irong Barat, Tebu, and Palas, which are also covered by the PSC for the provision for the deployment of EOR and further drilling to boost production output.
The installation of facilities on this platform is scheduled to commence in 2QCY13, with Tapis EOR targeted for commencement at end-2013. The Tapis R topside is an 18,000-tonne integrated deck with facilities for gas compression, water injection and production separation. It also has living quarters to accommodate up to 145 personnel. This platform will be connected by bridge to the existing Tapis B platform and a new riser platform, Tapis Q, which we understand is also being constructed by MMHE. It is estimated that about 2,600 personnel will be involved in various aspects during the peak period for activity. This Tapis EOR project is also one of the Entry Point Projects announced by Prime Minister Datuk Seri Najib Razak under the Economic Transformation Programme (ETP).
We are positive, but make no change to our FY11/FY12 earnings because we had earlier assumed some order book replenishment for the company.
Our fair value for the stock remains unchanged at RM6.60, based on a price-earnings ratio of 23 times FY12 earnings per share. We like MHB’s market leadership in Malaysia via its three core businesses of heavy engineering and construction, marine conversion and marine repair. Also, securing this most recent RM1.4 billion contract is solid proof of the unfailing support from Petronas and its PSC contractors. To date, the group’s order book and tender book remain strong at above RM4 billion and RM5 billion. — OSK Research, Nov 8
This article appeared in The Edge Financial Daily, November 9, 2011.
Maintain neutral at RM6.09 with fair value of RM6.60: Last week, Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) said its 100%-subsidiary, Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE), had signed a contract worth about RM1.4 billion as part of the Tapis Enhanced Oil Recovery (EOR) project with ExxonMobil Exploration and Production Malaysia Inc. The scope of work includes procurement, fabrication, testing, load-out, transport, installation and commissioning of the integrated Tapis R offshore platform deck as well as two inter-platform bridges. This project is expected to be completed by end-2013.
The Tapis field lies about 190km off Terengganu at a depth of 64m. It produces an extra light and low-sulfur crude which once served as the benchmark for pricing oil cargo in Australia, Indonesia and Vietnam. According to our secondary research, this field is one of seven mature offshore fields that ExxonMobil (78%) and Petroliam Nasional Bhd (Petronas — 22%) have agreed to develop as part of a 25-year production-sharing contract (PSC) finalised in June 2009. The other six fields are Seligi, Guntong, Semangkok, Irong Barat, Tebu, and Palas, which are also covered by the PSC for the provision for the deployment of EOR and further drilling to boost production output.
The installation of facilities on this platform is scheduled to commence in 2QCY13, with Tapis EOR targeted for commencement at end-2013. The Tapis R topside is an 18,000-tonne integrated deck with facilities for gas compression, water injection and production separation. It also has living quarters to accommodate up to 145 personnel. This platform will be connected by bridge to the existing Tapis B platform and a new riser platform, Tapis Q, which we understand is also being constructed by MMHE. It is estimated that about 2,600 personnel will be involved in various aspects during the peak period for activity. This Tapis EOR project is also one of the Entry Point Projects announced by Prime Minister Datuk Seri Najib Razak under the Economic Transformation Programme (ETP).
We are positive, but make no change to our FY11/FY12 earnings because we had earlier assumed some order book replenishment for the company.
Our fair value for the stock remains unchanged at RM6.60, based on a price-earnings ratio of 23 times FY12 earnings per share. We like MHB’s market leadership in Malaysia via its three core businesses of heavy engineering and construction, marine conversion and marine repair. Also, securing this most recent RM1.4 billion contract is solid proof of the unfailing support from Petronas and its PSC contractors. To date, the group’s order book and tender book remain strong at above RM4 billion and RM5 billion. — OSK Research, Nov 8
This article appeared in The Edge Financial Daily, November 9, 2011.
