Research houses have maintained their BUY calls on Malaysia Marine & Heavy Engineering Bhd (MMHE), citing the company's turnaround, strong order book, and promising long-term prospects despite its fiscal year of 2024 (FY24) earnings coming in below expectations. RHB Investment Bank Bhd (RHB Research) has kept its target price (TP) at 62 sen, projecting a 60% upside, while MIDF Amanah Investment Bank Bhd (MIDF Research) has revised its TP to 70 sen from 72 sen, expecting a total return of 75%.

MMHE returned to profitability in FY24, reporting a core profit of RM89.2 million compared to a RM490 million loss the previous year. However, earnings missed both RHB Research's and consensus forecasts at 89% and 82% of full-year estimates, respectively. Revenue rose 9% year-on-year (YoY) to RM3.6 billion, driven by higher project billings from its heavy engineering division and increased conversion jobs in the marine segment. Despite the earnings miss, the research house remained confident in MMHE's outlook, citing its improving project pipeline and sustained demand for offshore facilities.

MIDF Research noted that normalised profit after tax and minority interests surged to RM121.1 million, a significant recovery from the RM484.2 million deficit in FY23. The heavy engineering division's revenue grew 6.7% YoY to RM3.2 billion as projects progressed into the construction phase, while marine revenue jumped 30.3% to RM422 million, supported by strong demand for liquefied natural gas carriers (LNGCs). MMHE successfully repaired 86 vessels and delivered 16 LNGCs during the year, marking its strategic expansion into the Greek market.

As of the fourth quarter of 24, MMHE's order book stood at RM5.3 billion, reflecting a 16.8% decline quarter-on-quarter due to project completions. Despite this, analysts believe the company's RM5 billion tender book, with a 70:30 split between domestic and international projects, will support future growth. The Kasawari Carbon Capture and Storage (CCS) project is 58% complete, and the first steel cut for the OSS HVDC platform project is scheduled for April 2025.

Looking ahead, MMHE is expected to maintain strong performance in the marine business, supported by near-perfect client satisfaction scores for its vessels. Additionally, its offshore wind projects and CCS initiatives are anticipated to contribute to earnings, with an estimated compound annual growth rate (CAGR) of 10% in green revenues. Analysts also highlighted that energy transition projects are gaining momentum, with an expected sector-wide CAGR of 9% from 2024 to 2030.

Both research houses acknowledged potential risks, including slower order replenishments, supply chain disruptions, and volatile material costs. However, they believe MMHE's efforts in balancing oil and gas opportunities with renewable energy ventures position it well for sustainable growth.