Strategic diversification poised to propel MMHE

PETALING JAYA: Malaysia Marine & Heavy Engineering Holdings Bhd (MMHE) is expected to sustain its growth momentum, underpinned by a robust order book, improving contract terms and an expanding presence in green initiatives, according to analysts.

Despite margin contraction in its marine segment and competitive pressures, MMHE’s strong project pipeline and strategic diversification were seen as key drivers for its future performance.

RHB Research, for one, noted that while MMHE’s latest financial results fell short of expectations, primarily due to margin contraction in the marine segment, it maintained a positive outlook for the group, highlighting its turnaround and strong order book of RM5.3bil as of the fourth quarter of financial year 2024 (4Q24).

“We believe its robust project pipeline, coupled with improved contract terms, will support sustained profitability,” RHB Research said, reiterating a “buy” call with a target price of 62 sen.

TA Research shared a similar sentiment, emphasising that MMHE’s engineering segment’s secured order book of RM5.2bil would provide operational visibility through 2028.

The research house noted that MMHE was also eyeing an increase in its heavy engineering tender book to RM7bil to RM8bil, which could further boost earnings.

“Investments by oil majors in upstream activities are expected to support the Marine segment’s prospects, particularly in conversion projects,” TA Research said.

It also pointed out MMHE’s strategic shift towards the green economy, noting that carbon capture and storage activities contributed RM1.3bil to the group’s revenue in 2024, making up approximately 37% of total revenue. The research house maintained its “buy” recommendation with a target price of 61 sen.

MMHE posted a net profit of RM21.38mil in 4Q24, more than tripling the RM6.18mil recorded in the same quarter a year earlier.

This improvement was attributed to enhanced profitability in its heavy engineering and marine segments, despite a drop in revenue to RM817.61mil from RM1.12bil in 4Q23.

For the full financial year, MMHE turned a net profit of RM121mil, reversing a net loss of RM484.19mil in 2023, with revenue rising to RM3.61bil from RM3.31bil.

UOB Kay Hian (UOBKH) Research noted that MMHE’s project execution had contributed to its strong 2024 performance.

“MMHE closed 2024 with phenomenal profits that were driven by positive project close-outs,” it said.

The research house saw value in MMHE’s structural transformation and highlighted the company’s ability to benefit from sustainable profit recovery and decarbonisation opportunities.

“We see value in MMHE’s structural transformation story, as it enabled the yard to continue to benefit from sustainable profit recovery (for marine), and environmental, social and governance and decarbonisation opportunities,” UOBKH Research added, keeping its “buy” call and a higher target price of 70 sen.

MIDF Research also maintained a bullish stance, focusing on MMHE’s green revenue streams.

“MMHE is expecting an approximate RM5bil of order book in 2025. Despite the slightly lower estimates, we opine that the group will continue to deliver its projects on time and within budget, notably in the upstream offshore,” it said.

The research house projected a 10% compound annual growth rate for MMHE’s offshore wind projects and expected the company to sustain its green revenue contribution at 37% to 38% of total revenue.

MIDF Research raised its target price to 72 sen from 70 sen previously, citing the group’s return to profitability in 2024. MMHE shares closed 2.56% down to 38 sen yesterday.