MISC sees better prospect as oil demand recovers

by HARIZAH KAMEL / pic credit: misc.com.my

MISC Bhd remains upbeat on the current financial year outlook, underpinned by its long-term contracts and recovery in oil demand.

The energy-related maritime solutions and services provider stated that liquified natural gas (LNG) shipping rates are expected to remain firm in the short-term, sustained by robust vessel demand for LNG imports into Asia, Europe and South America.

Its LNG asset solutions segment’s revenue is expected to remain steady as most of its LNG carriers are on long-term charters, including its six very large ethane carriers.

The group sees the petroleum shipping market to remain depressed with freight rates still under pressure from vessel oversupply amid the continuing Covid-19 pandemic.

“In the short-term, the tanker market outlook continues to face challenges due to the new outbreaks of Covid-19 infections and re-imposition of restrictions on mobility and business activities in Asia, Latin America, the Middle East and Africa,” MISC noted in an exchange filing last Friday.

The company added that the tanker industry would gain from the OPEC+ consensus to increase oil production by 400,000 barrels per day each month from August 2021 into 2022, which will help ease a looming oil supply squeeze.

Its medium-term prospects remain positive, with oil demand picking up in tandem with a more broad-based economic recovery as normalcy gradually returns.

As the oil price reached its highest level in more than two years on the back of optimism over oil demand recovery, MISC foresees a gradual improvement in the oil and gas (O&G) sector, including in offshore exploration and production activities.

On the marine and heavy engineering segment, MISC continues to be cautiously optimistic on future business prospects due to the nation’s prevailing stringent-border restrictions, despite the O&G industry showing signs of recovery.

The group said foreign clients continue to opt for shipyards in countries with lower Covid-19 cases and more relaxed border restrictions.

MISC’s net profit for its second quarter ended June 30, 2021 (2Q21), jumped 79.9% year-on-year (YoY) to RM538.8 million from RM299.5 million last year.

The group registered higher operating profit in the segments of petroleum and product shipping, and offshore business, but they were offset by lower operating profit in LNG assets and an operating loss in marine and heavy engineering.

The group’s 2Q21 revenue rose 7.7% YoY to RM2.35 billion from RM2.19 billion.

Its earnings per share for the quarter was higher at 12.10 sen against 6.70 sen in 2Q20.

“In the 2Q, we completed the delivery of the remaining very large ethane carrier (VLEC) — Seri Elbert, which now makes us the single owner of six largest VLECs of its kind in the world.

“The current year also saw recognition of revenue from the conversion of a floating, production, storage and offloading unit. These reflect our deliberate strategy in positioning ourselves to capitalise on market opportunities across operating environments,” MISC president and group CEO Yee Yang Chien wrote in a statement last Friday.

MISC has approved a second tax exempt dividend of 7 sen per share amounting to RM312.5 million, payable on Sept 14 to shareholders registered at the close of business on Aug 30.

MISC shares closed unchanged at RM6.71 last Friday, valuing the company RM29.95 billion.

AmInvestment Bank Bhd (AmInvest) has maintained its ‘Buy’ call on MISC with an unchanged sum-of-parts-based fair value of RM7.75 per share, which reflects a premium of 3% from its 4-star environmental, social and governance rating.

Going forward, AmInvest analyst Alex Goh stated in a report that the gradual improvement to petroleum tanker rates is expected as OPEC+ has decided to raise production levels by two million barrels from August to December 2021.

He added that MISC’s earnings growth expectations for the financial year 2022 forecast are underpinned by upcoming delivery of an additional LNG carrier and dynamic positioning shuttle tanker in the second half of 2021.