MARC affirms rating on Malaysia Marine and Heavy Engineering at AA-IS with stable outlook

The key rating factors are MHB's conservative balance sheet and strong liquidity position, as well as its strong competitive position as the largest domestic offshore fabricator

  

MARC has affirmed its AA-ISrating on Malaysia Marine and Heavy Engineering Holdings Berhad’s (MHB) RM1.0 billion Sukuk Murabahah Programme with a stable outlook.

The key rating factors are MHB’s conservative balance sheet and strong liquidity position, as well as its strong competitive position as the largest domestic offshore fabricator. MHB’s rating also benefits from a one-notch uplift based on its status as a member of the Petroliam Nasional Berhad (PETRONAS) group and our view of continued business support from the group. The rating is moderated by the volatility in the contract flows that has an impact on its cash flow generation.

We note that the operational disruptions caused by the COVID-19 pandemic have recently delayed MHB’s construction works, resulting in slower revenue recognition in its key heavy engineering segment. The impact from the pandemic has also led to additional costs to expedite projects and substantial asset impairments. In its marine business segment, MHB faces challenges in securing foreign vessel contracts due to various restrictions, including a travel ban on foreign experts. These have all contributed to MHB posting pre-tax losses of RM401.3 million in FY2020 and RM141.8 million in 1H2021 and are expected to continue weighing on MHB’s operations and financial performance for the remainder of 2021.

Near-term financial risk is substantially mitigated by MHB’s strong liquidity position with cash and bank balances of RM625.0 million as at end-June 2021. MHB is also discussing with its key client on potential extensions of time for its existing heavy engineering projects and will be submitting variation orders for additional pandemic-related costs. As at end-June 2021, its heavy engineering order book stood at about RM2.7 billion, up from RM1.9 billion as at end-2020; it secured a RM1.1 billion engineering, procurement, construction, installation, and commissioning contract for the Jerun Development Project in 1Q2021. The contract provides earnings visibility until 2024.

MHB continues to maintain a conservative balance sheet, with total borrowings of RM319.4 million and a debt-to-equity ratio of 0.17x as at end-June 2021. Borrowing levels are not expected to increase as there are no further projects in the pipeline following the completion of its Dry Dock No. 3 for RM500.0 million in 2020. In the near term, our expectations are that the operational disruptions MHB has faced will be reduced as the pandemic measures are eased and the group’s credit profile will continue to be underpinned by a strategy of maintaining low leverage and strong liquidity position.

-Ends- 

Contacts:
Neo Xue Wei, +603-2717 2937/ xuewei@marc.com.my
Lee Chi Han, +603-2717 2939/ chihan@marc.com.my
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my 

[This announcement is available on MARC’s corporate website at www.marc.com.my ]

----   DISCLAIMER    ----

This communication is provided by Malaysian Rating Corporation Berhad (MARC) based on information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.

© 2021 Malaysian Rating Corporation Berhad

Send us your press releases to pressrelease.zawya@refinitiv.com

© Press Release 2021

Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.

The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.

To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.


More From Press Releases