Alliance: TH Heavy may doule EPS with RM400m record orderbook

KUALA LUMPUR (Mar 3):

TH Heavy Engineering Bhd may double its earnings per share (EPS) in anticipation that the usage of its fabrication yard will rise to 90%, according to Alliance Research.



In a note today, Alliance analyst Arhnue Tan said "TH Heavy could see EPS growth of 70-110% per annum over FY14-FY15. Further yard expansion, and securing a FPSO (floating production, storage and offloading) contract, would further improve earnings visibility for the group over the longer term."



According to Tan, TH Heavy which fabricates offshore oil and gas facilities, will enter FY14 with a RM400 million record order book. TH Heavy's financial year ends on December 31.



Tan said the RM400 million was a record high for TH Heavy since its Practice Note 17 regularisation plan in 2011. In addition to the RM400 million orderbook, Tan expects another RM300 million of new jobs to be added.



She said : “With expanded workforce and yard space as well as a record high orderbook of RM400 million , we expect earnings will normalise starting 1QFY14.“



Alliance had reiterated its “buy” call for TH Heavy shares with a target price of RM1.24. This was despite weaker earnings in 4QFY13.



At 10.56am, TH Heavy shares fell three sen or 3.16% to 92 sen.



"We expect that the group will add on more fabrication contracts this year. Management highlights that they are tendering for up to 9 projects currently, comprising large scale central processing type projects (with partner McDermott) worth RM1-2bn as well as smaller well head platform / topside projects on their own".



Alliance maintained its FY14 estimates for TH Heavy with the view that the expanded orderbook, workforce and yard space would see the group achieving strong growth in FY14.