T7 Global Bhd has secured a significant Maintenance, Construction, and Modification (MCM) services contract from ExxonMobil Exploration and Production Malaysia (EMEPMI). The contract, which is for Package B2 (Guntong), has a value of RM500 million and a five-year duration, with an option for a three-year extension, followed by an additional two years. The contract, which is effective from 1 December 2024, is expected to boost T7's earnings significantly, with Phillip Capital Holdings Sdn Bhd (PhilipCapital) projecting annual profits of RM9 million from this contract alone over 2025-2029.
PhillipCapital has maintained a positive outlook for T7 Global, reiterating their BUY call with a target price of RM0.68, which implies an 11x forward 2025E earnings per share (EPS). The contract win is expected to generate an 18% contribution to T7's estimated earnings for 2025, bolstering the company's already robust order book, which currently stands at RM3.1 billion. This recent contract is part of the ongoing positive flow of contract awards for T7, as only four of the 18 available HUC/MCM Pan Malaysia packages have been announced so far.
T7's earnings prospects are looking strong, with analysts forecasting a 21% growth in EPS for 2025. The company's sizeable order book, which includes long-term contracts such as the MOPU (Mobile Offshore Production Unit), gives the firm significant earnings visibility. Over 50% of its current order book is made up of MOPU contracts, which have earnings visibility of between 5 and 10 years.
T7 is also expected to benefit from increasing service rates for MCM contracts, which are estimated to rise by around 20%, resulting in higher net profit margins for the Guntong contract compared to previous agreements.
The recent contract win further supports the positive outlook for T7's financial performance, which analysts predict will continue to be driven by its strong order book and long-term projects. However, there are some risks to the company's performance, including the potential for unforeseen operational delays in existing MOPU projects, delays in the BHS project, and higher-than-expected operating costs.
Despite these risks, PhillipCapital remains optimistic about T7 Global's growth trajectory, underpinned by its growing contract portfolio and the favourable market conditions for its services.
