• Downgrade to HOLD (RM0.52). T7 Global (T7) FY23 result is deemed within our expectation as it made up 119% of our PBT estimate. 4Q23 earnings rose 27% YoY to RM14.4mn driven by revenue recognition of KLIA baggage handling system (BHS) contract in the non-energy segment as well as MCM and IWS revenue in O&G segment. Earnings will continue to grow in 1H24 driven by spill-over of uncompleted works in 4Q23 as well as maiden income from MOPU Shirley in 2Q24. We believe its growth potential remain encouraging with orderbook and tenderbook stood at RM2bn and RM3.8bn respectively. However, we downgrade T7 to a HOLD (from BUY) with unchanged SOP-derived TP of RM0.52. This implies 10x P/E on FY24F fully diluted EPS.

• Key highlights. Revenue rose 83% QoQ and 47% YoY to RM251mn mainly due (i) full quarter contribution from MOPU TSeven Elise, (ii) higher offshore maintenance (MCM) and Integrated well services (IWS) activities, (iii) construction revenue from KLIA BHS contract, and (iv) progress of Hibiscus South Angsi facilities decommissioning service. MOPU Shirley already sailed away to Nong Yao field and awaiting for installation in Mar 2024. Besides that, BHS contract achieved significant progress at 29% completion (as at end Dec23). However, only 10% of contract value already billed to clients as billing process takes some time.

• Earnings forecast. No change to earnings forecast.

• Outlook. T7’s tenderbook of RM3.8bn is comprised of tender for 3 new MOPU projects which may only awarded the earliest at 4Q24. These projects are located in Malaysia, Indonesia and Thailand. Besides that, the company remains aggressive in bidding for platform decommissioning jobs and MCM contracts within Malaysia.

Source: BIMB Securities Research - 27 Feb 2024