MISC expects better business prospects in 2H19

by SULHI KHALID/ pic by BLOOMBERG

MISC Bhd expects better prospects for its tanker business in the second half of 2019 (2H19) on a tighter vessel market amid rising oil exports from the US.

The energy-based logistics group expects a pick-up in the tanker market as ship supply will be crimped by vessels taken out of service for scrubber retrofitting, while the tanker market would be boosted by increasing the US oil exports and tonne-mile demand.

Its liquefied natural gas (LNG) shipping business unit continues to be underwritten by the existing portfolio of long-term charters in place.

“The LNG shipping spot market has been experiencing a seasonal decline in 1H19.

“Rates have firmed up in recent months and are expected to pick up gradually on the back of peak summer demand in Asia and Europe, and vessels are expected to be in short supply in the later part of 2019,” it noted in a statement to the exchange yesterday.

MISC added that a healthy level of activity in the upstream oil and gas exploration and production space will drive its offshore unit to assess the merit of pursuing developments within Atlantic Basin and South-East Asia.

This comes as the company posted a net profit rise of 24% year-on-year (YoY) to RM399.8 million in the second quarter ended June 30, 2019 (2Q19), on higher revenue from its LNG and heavy engineering segments despite higher impairment losses recorded during the period.

Revenue for the period rose 0.9% YoY to RM2.16 billion on higher number of operating vessels in the period, following the acquisitions of two LNG carriers in December 2018 and January 2019.

Its LNG segment’s revenue increased 10.4% to RM657 million on full revenue contribution from its Seri C vessel delivered in May 2018.

MISC’s heavy engineering division posted a 19.2% rise in revenue to RM277 million supported by higher progress of ongoing projects and approved change order in the current quarter.

Its petroleum segment’s revenue dropped 1.6% to RM922 million in the quarter due to lower number of operating vessels after the disposal of seven Aframax vessels and redelivery of two in-chartered Aframax vessels since June 2018.

MISC’s offshore segment’s revenue slumped by 10.5% to RM258 million in the three months as 2Q18’s revenue included construction revenue for the floating, storage and offloading Benchamas 2, which was completed in May 2018.

MISC remains cautious of its heavy engineering division’s prospects as uncertainty lingers amid prolonged trade and geopolitical tensions, as well as slowing economic growth.

“The recent contract award from Petronas Carigali Sdn Bhd for the Kasawari Gas Development project demonstrates the segment’s commitment to ensure the sustainability of its orderbook,” it said.

MISC declared an interim dividend of seven sen for the quarter, to be paid on Sept 18, 2019. The counter rose five sen to RM7.25 yesterday.