MARC Ratings has affirmed its AA-IS rating on Malaysia Marine and Heavy Engineering Holdings Berhad’s (MHB) RM1.0 billion Sukuk Murabahah Programme, with the outlook revised to positive from stable.
The positive outlook reflects MHB’s strengthened business profile, supported by a sustained high order book over the past four years, improved margins following its revised contracting strategy, and demonstrated resilience to market disruptions, including pandemic-related supply chain challenges. The rating remains underpinned by MHB’s established track record in offshore fabrication and marine repair, as well as the scale of its contracted business. These strengths are moderated by its exposure to the cyclical nature of the oil and gas (O&G) sector.
The rating incorporates a one-notch uplift from MHB’s standalone profile, reflecting its association with the Petroliam Nasional Berhad (PETRONAS) group and expectations of continued support from the group. PETRONAS holds an indirect interest in MHB through its 51%-owned MISC Berhad, which owns 66.5% of MHB.
MARC said MHB has demonstrated a sustained ability to maintain a sizeable order book, of RM4.0 billion to RM6.0 billion over 2022–2025, compared with approximately RM2.0 billion in the pre-COVID period. As at end-March 2026, its order book stood at about RM4.7 billion, with the heavy engineering segment contributing 78%. In March 2026, the group further strengthened its heavy engineering portfolio with the award of an engineering, procurement, and construction contract of four wellhead platform (WHP) facilities for marginal field design platforms from PTTEP Sarawak Oil Limited and PTTEP HK Offshore Limited (collectively, PTTEP), subsidiaries of Thailand’s national oil company, PTT Public Company Limited. The projects are located in Sarawak and form part of a broader agreement covering up to 11 WHPs, indicating potential for further contract awards from PTTEP. The operating environment remains supportive of order book replenishment, underpinned by projected oil prices of USD80 per barrel (bbl) to USD90/bbl in 2026, which are expected to sustain upstream capital expenditure. In addition, demand for new energy project development provides a complementary growth avenue.
In the marine segment, the average utilisation rate increased to 90% in 2025 (2024: 72%) across all three of MHB’s dry docks, reflecting stronger demand for maintenance, repair, and vessel conversion services. MARC Ratings understands that the focus on complex, longer-tenured, and higher-value conversion projects has also supported segmental revenue growth.
Geopolitical tensions in the Middle East heighten the risk of logistical disruptions and longer procurement lead times, which could affect project schedules and costs. However, MARC Ratings understands that MHB mitigates these risks through early material procurement, supplier diversification, and risk-sharing arrangements with clients (including cost pass-through mechanisms). The marine segment is expected to experience mixed effects. While vessel rerouting, longer voyage durations, and tighter fleet availability may arise, these conditions could also support higher demand for maintenance, repair and dry-docking services, driven by increased vessel utilisation and accelerated wear and tear. Overall, MHB is expected to withstand current challenges, supported by its experience in managing similar disruptions during pandemic-related supply chain constraints.
The heavy engineering order book is lumpy and exhibits high counterparty concentration among large O&G players. As at end-March 2026, Larsen and Toubro Limited (L&T) and PETRONAS Carigali Sdn Bhd accounted for 41% and 34% of the order book. L&T, a new counterparty, replaced Petrofac International (UAE) LLC through a novation in February 2026 following the termination of Petrofac’s contract by TenneT TSO B.V. L&T is an India-based multinational conglomerate with diversified operations across construction, energy, manufacturing, and services.
MHB’s revenue declined by 45.2% y-o-y to RM2.0 billion in 2025, reflecting lower heavy engineering contributions as several large projects neared completion while newer contracts remained at the early stages of execution. Pre-tax profit correspondingly decreased to RM104.5 million (2024: RM123.3 million). Cash flow from operations improved to RM172.7 million, supported by stronger collections from completed project milestones. Operating performance strengthened in 1Q2026, underpinned by higher revenue recognition from new projects. Based on its current order book, MHB expects its heavy engineering segment to generate higher revenue in 2026 (2025: RM1.4 billion).
Cash and cash equivalents remained strong at RM599.4 million as at end-March 2026. Total debt rose to RM472.5 million from RM252.0 million as at end-2025, primarily driven by drawdowns on revolving credit facilities to fund ongoing projects; revolving facilities accounted for about 55% of total debt. Despite the increase, the debt-to-equity (DE) ratio remained moderate at 0.31x. MHB plans to issue up to RM350 million under its rated programme in 2026, mainly to fund capex aimed at enhancing operational efficiency and productivity through yard automation, digitalisation and targeted infrastructure upgrades in phases, which is expected to support improved turnaround times and competitiveness. On a pro forma 1Q2026 basis, the DE ratio is projected to increase to a still manageable level at about 0.50x following the sukuk issuance.
