Sunday, November 10, 2013

MISC Bhd - Supported by asset values (CIMB)

MISC Bhd -
Current RM5.01
Target RM5.08
Supported by asset values

MISC's 9M13 core net profit was slightly below at 68% of our full-year forecast due to more-than-expected tanker shipping losses. Prospects for the petroleum and chemical divisions remain gloomy, but MISC is expected to grow group profits nevertheless on its offshore . Although we cut our FY13 core EPS forecasts by 10%, we raise our target price, based on an unchanged 30% discount to SOP, after rolling it forward to end-2014 and factoring higher expected petroleum vessel prices. While losses at its liquid bulk segments are likely to persist, asset values lend strong support to MISC's share price. Therefore, we upgrade from Underperform to Neutral.


Although we cut our FY13 core EPS forecasts by 10%, we raise our target price, based on an unchanged 30% discount to SOP, after rolling it forward to end-2014 and factoring higher expected petroleum vessel prices. While losses at its liquid bulk segments are likely to persist, asset values lend strong support to MISC's share price. Therefore, we upgrade from Underperform to Neutral.

3Q13 results highlights
MISC posted a 3Q13 core profit of US$104m, up a staggering 196% yoy after LNG profits were boosted by a full quarter's contribution from FSU Lekas (vs. just one month in 3Q12). Chemical losses narrowed amid higher freight rates and lower bunker prices, while the absence of container shipping losses also helped. Associate contribution rose 237% yoy due to US$16.9m earnings from its 50% stake in FPS Gumusut-Kakap in 3Q13. Petroleum tanker losses, however, widened as rates remain persistently weak, while MMHE continued to see declining profits due to its failure to replenish its orderbook.

LNG profit to shrink in 2014
One of MISC's LNG vessels will finish its 20-year charter in July 2014. Discussions for a renewal with the charterer Petronas have been ongoing for some time but progress has been slow, raising the risk that MISC and Petronas may not be able to agree on the terms of the renewal. Also, the Puteri Intan ship is old and fuel efficiency is likely poor. Petronas's Gladstone LNG project has also been delayed, reducing its need for an immediate renewal.

Tanker losses to continue
MISC estimates that aframax freight rates will need to almost double from existing spot market levels for the petroleum division to get back into the black; this is not expected until 2015-16 at the earliest. Chemical tanker losses are expected to persist until 2016-17, unless bunker costs fall or spot rates rise unexpectedly.



Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 08/11/13

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