Loss-Making Malaysia Marine and Heavy Engineering Holdings Berhad (KLSE:MHB) Set To Breakeven

We feel now is a pretty good time to analyse Malaysia Marine and Heavy Engineering Holdings Berhad's (KLSE:MHB) business as it appears the company may be on the cusp of a considerable accomplishment. Malaysia Marine and Heavy Engineering Holdings Berhad, an investment holding company, provides marine and heavy engineering solutions for offshore and onshore facilities, and vessels in Malaysia. The RM1.0b market-cap company announced a latest loss of RM397m on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is Malaysia Marine and Heavy Engineering Holdings Berhad's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Malaysia Marine and Heavy Engineering Holdings Berhad

According to the 9 industry analysts covering Malaysia Marine and Heavy Engineering Holdings Berhad, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of RM25m in 2021. So, the company is predicted to breakeven approximately 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 113% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Malaysia Marine and Heavy Engineering Holdings Berhad's growth isn’t the focus of this broad overview, though, keep in mind that generally an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 13% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Malaysia Marine and Heavy Engineering Holdings Berhad which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Malaysia Marine and Heavy Engineering Holdings Berhad, take a look at Malaysia Marine and Heavy Engineering Holdings Berhad's company page on Simply Wall St. We've also put together a list of important factors you should look at:

1. Valuation: What is Malaysia Marine and Heavy Engineering Holdings Berhad worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Malaysia Marine and Heavy Engineering Holdings Berhad is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Malaysia Marine and Heavy Engineering Holdings Berhad’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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