by winston » Thu Jun 04, 2020 8:58 am
not vested
Trading Buy: MHB-5186
Turnaround in FY20; Sizable RM2.7bn orderbook and RM0.28 netcash/share to navigate the storm
(Last price: RM0.505, Potential upside +30.7%)
Company Profile
MHB (listed in Oct 2010) provides solutions for the O&G sector including building and installing offshore structures, marine repair of vessels including large LNG and LPG carriers and tankers, and marine conversion of vessels.
In FY19, the marine repair & conversion (MRC) and heavy engineering (HE) divisions contributed about 34% and 66% to revenue, respectively.
Trading Catalyst
Although short to mid-term outlook remains murky amid the disruption in work orders during the MCO period and potential tenderbook (amounted to RM17bn) destruction during this cyclical downturn, MHB’s orderbook of RM2.7bn (to sustain works for the next 2-3 years) and net cash of RM440m (28sen/share) could provide ample financial muscle to sail through FY20/21 relatively unscathed.
Valuation is also undemanding at 0.34x P/B (32% below 5Y mean 0.5x), supported by strong parental support (via MISC’s 66% stake) and could be beneficiary of PETRONAS’ future developments. Also, a privatisation possibility, based on current depressed price.
Technically, the stock is poised for a bullish triangle breakout soon to spur prices further towards RM0.56-0.66 territory.
Technical View
Resistance: RM0.560 / RM0.610 / RM0.660
Support: RM0.460 / RM0.440
Cut loss: RM0.435
Key Financial Stats
Trading at 0.34x P/B (-32% vs 5Y mean 0.5x), supported by RM0.28 netcash/share (55% of marketcap) and attractive 5.9% DY.
Source: Bloomberg, HLIB
It's all about "how much you made when you were right" & "how little you lost when you were wrong"