Malaysia Marine & Heavy Engineering Holdings Berhad (MMHE) recorded a remarkable sixfold increase in earnings for the first half of FY24, driven by successful cost recovery and robust performance in its core segments. Revenue for 1HFY24 rose by 21.4% year-on-year to RM1.88 billion, with earnings surging to RM83.5 million, a significant turnaround from the RM385.1 million loss in 1HFY23.

Analysts maintain a BUY rating on MMHE with an unchanged target price of RM0.65, highlighting the company's positive performance and optimistic outlook. The earnings exceeded expectations by 52% compared to yearly forecasts and by 94% against consensus estimates. The Heavy Engineering segment contributed significantly to these results, with revenue increasing by 20.3% year-on-year to RM1.68 billion, and profit before tax (PBT) rising nearly sevenfold to RM68 million. This growth was primarily due to ongoing projects advancing into the construction phase and the recognition of cost recovery claims.

The Marine segment also showed strong performance, with revenue increasing by 30.8% year-on-year to RM206 million and PBT growing by 41.7% to RM22.9 million. The segment benefited from higher dry-docking and repair activities, completing maintenance on 42 vessels, including four LNG carriers, year-to-date. MMHE anticipates continued growth in this segment, supported by stable oil prices and increasing demand for low-carbon solutions in the upstream oil and gas sector.

Looking forward, MMHE expects that upstream investments will drive demand for offshore vessels and sea station platforms, benefiting both the Heavy Engineering and Marine segments. The company is also focusing on expanding its LNG carrier customer base, despite facing competition from new repair yards in neighbouring countries and China.

In response to the strong 1HFY24 performance, MMHE has revised its earnings forecast for FY24 upward by 186%, reflecting reduced impairments from Heavy Engineering projects nearing completion and the positive impact of new offshore wind projects. The company also expects increased upstream capital expenditure and a busy maintenance season for ships in the third quarter, which could further boost demand for its services.

Sources: MIDF, RHB
Titles: Cost Recovery Pulled 1HFY24 Earnings to A 6-Fold Surge, Cost Recovery Claims Keep Buy