Friday, June 10, 2011

MMHE ... Jun11

MMHE is entering into a MoU with Sime Darby Engineering to acquire its 130-acre Pasir Gudang yard for RM399 million cash, as it will radically transform Malaysia’s fabrication landscape.

Including Petroliam Nasional Bhd’s (Petronas) Teluk Ramunia yard, MMHE will have access to the country’s largest domestic fabrication yard of 672 acres, which is 3.5 times Kencana Petroleum Bhd’s current 192 acres.

While the Pasir Gudang yard will be partly utilised for its existing Oil and Natural Gas Corp and Kebabangan jobs, the Pasir Gudang and Petronas’ Ramunia yards offer ample additional fabrication capacity which will underpin MMHE’s re-accelerating earnings momentum and growing deepwater expertise.

MMHE remains one of our top picks for the oil and gas sector due to …

(1) Capacity expansion stemming from Sime Darby Engineering’s Pasir Gudang yard, which will accelerate order book recognition, drive margin efficiencies and enhance MMHE’s deepwater capabilities.

(2) Further upgrades in consensus margin assumptions given the possibility of a quick turnaround from the reaping of “low-hanging fruit” efficiencies under the new managing director/CEO from Technip’s subsea division.

(3) Significant additions to the group’s net order book of RM3 billion from the prolific wave of upcoming projects by 2H11 as half of MMHE’s Pasir Gudang yard will be unutilised when the topside structure of the Gumusut-Kakap floating production storage semi-submersible is lifted onto its hull.

(4) New margin benchmarks for MMHE’s tenders of over RM5 billion comprising more complex structures than the jobs undertaken by other domestic operators.

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