MHB: Strong Project Execution Drives Earnings Outperformance, Target Price Upgraded
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent report by TA Securities highlights a robust financial performance, with core net profit for the full year FY25 significantly exceeding both the investment bank’s and consensus estimates. This strong showing was primarily driven by favorable close-out outcomes from various Heavy Engineering projects.
Performance Highlights
The company reported an FY25 core net profit of RM118.3 million, which was an impressive 187.3% above TA Securities’ full-year forecast and 147.4% above consensus estimates. This overperformance underscores effective project management and cost efficiencies within the Heavy Engineering segment.
In the fourth quarter of FY25 (4QFY25), despite a 28.9% year-on-year (YoY) decline in revenue to RM581.7 million—largely due to Heavy Engineering projects nearing completion and new jobs being in early execution phases—core net profit surged by 126.5% YoY to RM58.0 million (from RM25.6 million in 4QFY24). This was partially mitigated by a significant 73.5% YoY increase in the Marine segment, attributed to higher vessel conversion and LNG repair activities. Quarter-on-quarter (QoQ), revenue saw a 14.1% increase, supported by robust contributions from the Marine segment (+63.6%), further boosting core net profit to RM58.0 million from RM36.7 million in the previous quarter.
Outlook and Earnings Revisions
In light of the better-than-expected project close-outs in Heavy Engineering and the sustained strength in vessel conversion and LNG repair work within the Marine segment, TA Securities has revised its earnings projections upwards. The firm raised its FY26 and FY27 earnings forecasts by 18.2% and 17.8% respectively, incorporating a 50-bps and 120-bps increase in EBIT margin assumptions for the Heavy Engineering and Marine segments. Additionally, an initial FY28 core net profit forecast of RM131.6 million has been introduced.
The Heavy Engineering segment’s order book remains stable quarter-on-quarter at RM4.0 billion, providing clear earnings visibility through 2029. An estimated RM14 billion tender book also presents significant upside potential from newly secured projects. The Marine segment continues to deliver stable performance, having completed 87 vessel repair and maintenance jobs in FY25, including a record 26 LNG carriers. Momentum is expected to be maintained with an anticipated RM1.0 billion marine order intake, primarily involving floater conversion projects.
Furthermore, the wind energy segment saw a substantial increase in its contribution to RM228.0 million in FY25, up from RM23 million in FY24, with overall project completion at 22% as of December 2025. While contributions from the Kasawari Carbon Capture and Storage (CCS) project moderated in FY25 due to its nearing completion, management expects future CCS contributions to be driven by ongoing project execution.
Recommendation
TA Securities has maintained its BUY recommendation on the stock, reflecting confidence in its continued performance. The target price (TP) has been set at RM0.25, representing a 25.0% upside from the last traded price of RM0.20. This valuation is based on 0.60x CY26 P/B, incorporating a 3% ESG premium.
