BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Monday, 4 June, 2012

News Flash
Show Me The Contracts
i. Following news that Fred Olsen Productions withdrawal from the Lam Soon FPSO contract, PetroVietnam Technical Services Corporation is reported to have tied up with Yinson Holdings Berhad (Non-Rated) to probably take over the contract. The final contract will involve converting a tanker supplied by Vietnams PV Transportation into a FPSO plus using an APL turret mooring system already purchased by Fred Olsen Production. Comments: While it is speculated that the failure to secure the necessary financing by Fred Olsen as the main reason for its pull out, it is also understood that local content requirements are also making the contract a tough challenge. Yinson is not new to Vietnams O&G scene as it is already operating 2 units of OSV with PetroVietnam more significantly is its 20 year bareboat charter for a Floating, Storage and Offloading charter contract worth USD331m with PetroVietnam where the vessel is scheduled for deployment by early 2013. ii. MMHE is reported as the front runner for an engineering procurement and construction (EPC) contract linked to the development of the F14 and F29 discoveries in Block SK 308 located offshore Sarawak. The contract is likely to include the construction of a new drilling platform in F14 and modification to the existing F23 gas production and processing complex. Output from F14 and F29 will be transported to the F23 complex for processing. Comments. Currently detailed engineering for the F14 and F29 development are progressing together with the D12 and Laila fields. Ramunia Holdings (NonRated) has recently announced that it has secured the Letter of Intent for the fabrication of D12DR-A and LADR-A substructures as well as D12DR-A and LADRA topsides, both for the D12 and Laila fields with contract value estimated at RM150m. This is another good piece of news for MMHE as we reported last week that it is also in a forefront in securing an EPC contract in Turkmenistan through a joint bid. However, with no significant contract win so far this year and outstanding orderbook of RM2.4bn, MMHE would need a very strong orderbook replenishment by 2H12 to provide better FY13 earnings visibility. We expect both contracts will likely to be awarded soonest by end of this year with earnings contribution to flow in 2013. Our view. We remain sanguine on the sector and expect continuous positive newflows throughout 2012. OVERWEIGHT rating on the sector, maintain Buy on Bumi Armada (RM4.44), Dayang (RM2.43), Dialog (RM2.78) and Uzma (RM2.70), Trading Buy on Wah Seong (RM2.28) and Sell on MMHE (RM4.37).

Chiong Tong Chai chiongtc@bimbsec.com.my 03-26918887 ext 175

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4 June 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system: STOCK RECOMMENDATION BUY OUTPERFORM TRADING BUY NEUTRAL TRADING SELL SELL

Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months The stock is expected to perform ahead of the market in the next 12 months The stock is expected to outperform the market in the next 3 months The stock is expected to perform in line with the market in the next 12 months The stock is expected to underperform the market in the next 3 months An expected price depreciation of more than 10% in the next 12 months

SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

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BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

www.bimbsec.com.my

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