$MISC / 3816 (MISC BERHAD) - 2Q24
Delays and Cost Overruns in FPSO Mero 3: The ongoing delays with the FPSO Mero 3 project could lead to additional costs and further delays in achieving first oil. If these issues persist, they could negatively impact MISC's financial performance, particularly in the offshore division. The high execution risks associated with this project could also deter future investments or contracts in this segment.

Weak LNG Market: The gas & asset solutions division is facing significant pressure from an oversupplied LNG market, leading to lower spot rates and utilization. With a large number of LNG vessels expected to be delivered in FY24-25, the oversupply issue may persist, further depressing rates and margins. This weakness could drag down overall profitability, especially if the global LNG market does not recover as anticipated.

Quarter-over-quarter decline: MISC's revenue decreased by 9% in 2QFY24, with all divisions experiencing a drop, particularly the offshore business and gas & asset solutions. The gas & asset solutions division faced lower daily charter rates (DCRs), leading to weaker operating margins, while the offshore division incurred losses due to increased finance costs associated with FPSO Mero 3, resulting in a 12% decline in core earnings.

there are a few areas to be cautious about. While the company is strong, challenges exist in LNG shipping and potential delays in offshore projects. Investors should monitor how MISC navigates these issues, especially with the delays and costs related to FPSO Mero 3, and how they manage the evolving risks in the LNG shipping market.