Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) entered a Memorandum of Understanding (MoU) with HD Hyundai Marine Solution Co. Ltd (HDHMS). This partnership is set to focus on the marketing and installation of green retrofit solutions in the Southern Asia region, with the MoU valid for two years, and an optional extension for another two years.
MIDF Research (MIDF) in a note today (Sept 4) said that there are no changes to the company’s earnings forecast. MMHE maintains a ‘BUY’ call with a target price of RM0.65, reflecting confidence in the long-term benefits of this strategic partnership.
Despite the positive outlook, the MoU is not expected to have a material impact on MMHE’s earnings in the near term, MIDF said.
Under this MoU, MMHE will serve as HDHMS’s partner, focusing on the installation of green retrofit solutions aimed at enhancing vessel energy efficiency and reducing environmental impact.
According to MIDF the adoption of green retrofitting technologies is expected to offer significant advantages in the long run, including a reduction in greenhouse gas (GHG) emissions, compliance with the International Maritime Organisation’s (IMO) decarbonisation requirements, extended fleet lifespans, reduced fuel consumption, and overall cost savings.
Additionally, vessels that undergo green retrofitting are likely to see an increase in market value, maintaining competitiveness within the maritime industry.
While there are inherent risks in green retrofitting, such as high initial costs, regional regulatory uncertainties, operational disruptions, and technological challenges related to fuel types, MIDF said these are considered manageable.
MMHE’s proven track record in maritime retrofits positions the company well to mitigate these risks, making the overall risk profile of this partnership minimal.
This collaboration represents a significant opportunity for MMHE to explore and implement advanced green technologies within the maritime sector.
MIDF said that with the sector accounting for approximately 3% of total global GHG emissions, driven by its reliance on carbon-intensive fuels and the sheer volume of global trade carried out by sea, there is an increasing demand for greener solutions.
The IMO aims to reduce the carbon intensity of shipping by at least 40% by 2030, compared to 2008 levels, and the adoption of green retrofitting is a crucial step toward achieving this target.
Currently, the carbon intensity in the maritime sector ranges between 7-10 grams of CO2 per ton-mile, down from the 16-20 grams recorded in 2008. Continuous efforts to greenify the sector are expected to drive higher demand for such solutions, providing a favorable outlook for MMHE’s marine operations.
