MISC sets sail for a stronger growth trajectory
PETALING JAYA: The bullish outlook for the petroleum and gas sub-segments in the near term, as well as the commencement of charter revenues for floating production storage and offloading (FPSO) vessel Marechal Duque de Caxias (Mero 3), is expected to put MISC Bhd on a more favourable earnings growth trajectory.

At the same time, the earnings of the energy-related maritime solutions and services provider is anticipated to get a shot in the arm as it is also bidding for more contracts across the gas tanker, petroleum tanker and offshore segments.

AmInvestment Bank Research, which is upgrading MISC to “buy” from “hold” with a higher sum-of-parts-based fair value of RM8.50 per share, said it is raising the group’s earnings forecast by 3% to 4% for financial year 2024 (FY24) and FY25 to account for stronger growth outlook for both the petroleum and gas sub-segments in the near term.

The projected higher earnings for the period is also due to the commencement of charter revenues for Mero 3.

The research house said guidance from management indicated that the shipping industry outlook will see broad-based strength in the near term, among others, due to positive prospects for liquefied natural gas (LNG) shipping, driven by demand growth in Asia.

Global liquefaction capacity is expected to increase in 2024, with final investment decisions for LNG facilities amounting to 100-150 tonnes a year, it noted.

“Furthermore, the petroleum shipping market is expected to benefit from strong Atlantic exports and increased crude imports to Asia. However, a tight tonnage supply environment over the next two years (up to 2025) will support high spot rates,” it noted.

MISC’s net profit slid 2.7% to RM627.3mil for the fourth quarter ended Dec 31, 2023 (4Q23) from RM645mil in 4Q22, despite revenue increasing 2.5% to RM4.3bil from RM4.2bil.

For the full year, net profit rose 16.5% to RM2.1bil from RM1.8bil in 2022 on the strong performance by both its gas assets and solutions and petroleum and product shipping segments, as well as lower impairment.

Meanwhile, UOB Kay Hian Research said it is maintaining its “buy” call on the stock with a higher target price of RM9.05.

It believes MISC deserves to trade at the top end, from the angle of strong earnings before interest, taxes, depreciation and amortisation from an upcycle in petroleum earnings, followed by a step-up in long-term earnings base from Mero 3 (to compensate for the cyclical nature of tankers) and further contract wins.

“We continue to be bullish on tanker rates, especially on time charters, as long as the world demands energy security and security of the midstream transportation pathways.

“We retain our dividend per share forecast of 33 sen, as we believe it may be more prudent for MISC to conserve the cash flow buffer for the next investment cycle (that involves transition),” it said.

CGS International Securities Malaysia Research said it is upgrading MISC from “hold” to “add”, as the sail-away of the Mero 3 to Brazil on Feb 24 this year raises market anticipation of a successful startup by year-end.

“If MISC successfully commissions the Mero-3 and achieves first oil and final acceptance by end-FY23, the market may also celebrate this major achievement.

“We have pencilled-in Jan 1, 2025 as the start of the 22.5-year firm charter period. MISC is also bidding for more contracts across the gas tanker, petroleum tanker and offshore segments; a potential major win could catalyse the share price, in our view,” it said.
Corporate News,MISC,BullishOutlook,EnergySector,EarningsGrowth,Mero3,FPSO,CharterRevenue,LNGShipping
The bullish outlook for the petroleum and gas sub-segments in the near term, as well as the commencement of charter revenues for floating production storage and offloading (FPSO) vessel Marechal Duque de Caxias (Mero 3), is expected to put MISC Bhd on a more favourable earnings growth trajectory.