Thursday, August 8, 2013

MISC : Holding steady (HwangDBS)

BUY RM5.29
KLCI : 1,782.51
Price Target : 12 MONTHS RM 6.45
Holding steady

Petronas to directly own new LNG vessels; existing MISC vessels not affected
At 1x book, we believe share price does not reflect much of the potential of LNG vessels
Near term growth drivers intact; stock remains undervalued
Maintain Buy and RM6.45 SOP-based TP

Maintain Buy. Petronas announced that it will directly procure and own its next phase of LNG vessels. The move is disappointing, removing a potential long-term growth avenue for MISC. However, with MISC trading at 1x book,
we reckon little of the potential from the new LNG vessels has been factored into the current share price. The share price is also below Petronas' RM5.50 failed privatization offer. There is no change to our earnings forecast and RM6.45 sum-of-parts-based TP (valuing the LNG shipping business at book value), as we had not imputed the potential of the LNG vessels.

Near term growth drivers are intact. This year, the Group will benefit from contribution of floating storage units for the Malacca regas project, commissioning of Gumusut-Kakap in 2H13 and two additional Very Large Crude Carriers (VLCCs) that will be delivered in 2H13. FPSO Cendor will provide another boost to next year’s earnings. We understand the Group is exploring possibilities for new offshore projects. In our view, there are opportunities to unlock value from its portfolio of world-class oil & gas assets.

Stock remains undervalued. Despite the disappointing news, we believe the stock remains undervalued with its resilient LNG cashflows, solid oil & gas assets, and significantly stronger balance sheet following the sale of 50% stake in Gumusut-Kakap and the liner business last year.

Petronas announced that it has decided to directly procure newbuild LNG ships to meet its LNG transportation requirements. According to the statement, the move will allow Petronas to have direct access to LNG shipping capacity at the lowest possible costs. We understand Petronas is looking at additional LNG sales requiring 4-8 vessels costing approximately US$800-US$1,800m.

Petronas will engage MISC to provide project management and technical consultancy services for the construction of the new LNG ships, and operate and manage the vessels postconstruction. The move does not preclude MISC's participation in Petronas’ future shipping projects. With its long track record of operating LNG vessels and large fleet which is among the world's largest, there are also opportunities for MISC to compete for third party projects

Source/Extract/Excerpts/来源/转贴/摘录: HWANGDBS Vickers Research
Publish date: 05/08/13

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