MISC
Misc Berhad
Company Background
$MISC / 3816 (MISC BERHAD)
Research by CGSI
$MISC / 3816 (MISC BERHAD)
Research by Maybank
Sharing market perspective from broker. Found it useful..
CHINA ROARING BUT MY STILL ATTRACTIVE; RINGGIT DOUBLED EDGED SWORD; FPSO STILL BRIGHT SPARK IN O&G SPACE; ASTRO TURNING AROUND?; PROFIT TAKING FLOWS...
*MY MKT:* *YES, CHINA IS EXCITING AGAIN BUT M’SIA REMAINS THE MARKET TO BE IN =)* In fact, there are many questions remain and execution is key for China esp. fiscally. The capital injections into SOE banks would help but as Michael (CH banks analyst) noted, he’s unsure which segments could *drive loan growth* as households may not be a driver unless *property transactions/consumer confidence* pick up materially. What’s more if demand’s weak, it won’t matter if corporates are given funds while banks may not dare to lend unless they’re absolved of blame for bad debts. Hence, focus on *MY domestic mkt.* though on flows, we see local insti funds are realizing profits.
Yes, ringgit’s strength is a double-edged sword ie. *good for importers but a bane for exporters.* Regardless, seasoned FMs we spoke to aren’t too worried as weaknesses seen in exporters are *short-term knee-jerk* effects. Take *VSI* for instance, stock was beaten down on weak USD as *ASP adjustments are done qtrly.* However, correction is an opportunity to collect instead as eventually, currency differences will be *passed on* while underlying demand for its clients’ *products are healthy.* *SIME’s* position is even *better.* Contrary to mkt. perception, SIME’s a *net beneficiary of RINGGIT gains* due to acquisition of *UMW.* Although *China/industrial* operations have ongoing challenges, thanks to *currency and full UMW* impact, its M’sia based *PBIT contribution will increase* from 24% in ’23 to *60% by ’25,* showing how *accretive UMW is.* Plus, *60% of component costs* are sourced abroad and currency *savings* from this alone flow *straight to EBIT.* All in, with China stimulus, SIME could win on *both* currency and China fronts.
Meanwhile, it’s *not getting better* for O&G services here till better clarity on issues like *Petros/Petronas* and of course, escalating *Mid East* conflict isn’t helping but at least, *FPSO segment* still looks lively. *MISC* looks likely to achieve *first oil for FPSO Mero-3* in the coming days and this a *huge catalyst for 4Q* earnings though this call comes with *caveat* as Petronas *will end 5 x legacy LNG* charters in 27-28 and replace them with charters for *2 x LNG from ‘27* onwards. Basically, it seems *most/all of MISC’s* maturing long term LNG charters with Petronas *will not be extended* for the long haul (20 yr) which Raymond thinks will be a *2-3% negative to earnings.* He’s not worried though as LNG charter *terminations were sort of expected* as other shipping companies can offer *better terms* to Petronas while MISC’s legacy vessels are also *not up to IMO* standards. BUT, MISC now has *orders for 10 x LNG ships* which should more than help *arrest the decline* in LNG earnings from *FY26 onwards* and yes, Mero 3 will be the *driver in FY25.*
Similarly, *YINSON’s* MQ & Atlanta FPSOs will achieve *first oil in Oct and Dec* respectively which is *music to investors’ ears* as this means cash *inflows* from charter hire. Recall, YINSON is a well-run company, in the *right space ie FPSO* and so, its management still wants to take advantage of the *growth* in this segment, but this has come at the *expense of gearing* which has ballooned. So, achieving first oil will boost both *operating cashflows and investors’ confidence* as daily charter hire is paid only when the assets are working.
Finally, *ASTRO,* yes ASTRO just had its *best quarter* in a while *(5 qtrs of decline)* on among other things, *favorable forex impact.* Out of the woods? Hard to say as *rising content costs and adex weakness* persist but encouragingly, bundling/upselling strategies have *driven ARPU* higher. All in, it requires patience when it comes to *ASTRO turnaround* as costs savings are taking *longer* to materialize but at least, the strengthening *ringgit helps* the c.35% USD-based costs, and so, *reinstatement of dividends* could be on the cards which is a rerating catalyst. Hopefully…
$VS / 6963 (V.S. INDUSTRY BERHAD) $SIME / 4197 (SIME DARBY BERHAD) $MISC / 3816 (MISC BERHAD) $YINSON / 7293 (YINSON HOLDINGS BERHAD) $ASTRO / 6399 (ASTRO MALAYSIA HOLDINGS BERHAD)
MISC Bhd’s latest contracts for two newbuild liquefied natural gas (LNG) carriers are projected to have a daily charter rate of between US$110,000 and US$120,000 per day.
The latest developments in MISC Bhd’s operations, involving the construction of liquefied natural gas (LNG) carriers and new time charters, have set the tone for the shipping company to further elevate its business and rejuvenate its LNG fleet with modern, efficient vessels.
$MISC / 3816 (MISC BERHAD)
Research by RHB
$MISC / 3816 (MISC BERHAD)
Research by Kenanga
KUALA LUMPUR: MISC Bhd and Samsung Heavy Industries Co Ltd (SHI) have signed shipbuilding contracts for the construction of two new liquefied natural gas (LNG) carriers, scheduled for delivery in 2027.
© New Straits Times Press (M) Bhd
PETALING JAYA: MISC Bhd and Samsung Heavy Industries Co Ltd have signed shipbuilding contracts for the construction of two newbuild liquefied natural gas (LNG) carriers, scheduled for delivery in 2027.
$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.
$MISC / 3816 (MISC BERHAD)
Research by Kenanga
MARKET PERFORM – TP RM8.09
" Awaiting Mero 3 Hook Up”
MISC’s 1HFY24 core profit was in line with both our and consensus expectations. While its petroleum division outlook looks robust, the gas & asset solutions division remains challenged as reflected in weak LNG shipping spot markets, and FPSO Mero 3 is still undergoing the hook-up process, with a potential slight delay in achieving first oil. We maintain forecast, SoP-TP of RM8.09 and our MARKET PERFORM call as risk-reward appears balanced.
Analyst:
Lim Sin Kiat, CFA
limsk@kenanga.com.my
$MISC / 3816 (MISC BERHAD)
Research by MIDF
BUY– TP RM9.75
" Earnings Gained from Charter, Upstream Activities”
• MISC’s 1HFY24 core earnings up +36%yoy; in-line with expectations
• Higher profit from increased charter rates, higher heavy engineering and marine activities
• Higher LNG demand, higher charter rates, higher upstream activities to support MISC moving forward
• Maintain BUY with an unchanged target price of RM9.75
Analyst:
MIDF Research
research@midf.com.my
$MISC / 3816 (MISC BERHAD)
Research by Maybank
HOLD – TP RM 8.59
" 2Q24: Within expectations;also, Mero 3 first oil delayed”
MISC’s 2Q24 results came in within ours and consensus expectations. With that, we make no changes to our FY24-26E earnings estimates. We also maintain our HOLD call with an unchanged SOP-based TP of MYR8.13. We continue to like MISC for its: i) defensive nature from its LT LNG charters which provide recurring cash flows; and ii) decent dividend yields of 4+% for an investible, stable and solid blue-chip name.
Analyst:
Jeremie Yap
jeremie.yap@maybank-ib.com
$MISC / 3816 (MISC BERHAD)
Research by HLIB
HOLD – TP RM8.25
"Broadly inline”
MISC posted 2Q24 core earnings RM550.7m (-21.0% QoQ, 14.4% YoY), bringing 1H24’s sum to RM1.25bn (+6.6% YoY). We deem the results inline with our (51%) and consensus (50%) forecasts. Core bottom line was down 21% QoQ, resulting from lower EBIT from LNG (-31%; lower earnings days and charter rates as LNG demand softened) and Offshore business (-50%; lower revenue recognition from the conversion of Mero-3 as it reaches tail-end of project completion and coupled with higher finance costs). However, it was partially offset by stronger contribution from MHB (4.5x) due to successful cost recovery claims for its legacy projects. Maintain our forecasts and HOLD call with unchanged TP of RM8.25..
Analyst:
Brian Chin
brianchy@hlib.hongleong.com.my
$MISC / 3816 (MISC BERHAD)
Research by RHB
Buy – TP RM 9.84
"On Track for a Strong Year; Reiterate BUY”
Reiterate BUY, new MYR9.84 SOP-based TP from MYR9.35, 15% upside with c.4% FY24F yield.MISC’s1H24 results arewithin our expectations,with core earnings rising 20% YoY. We continue to like MISC for its steady operating cash flow, on top of the anticipation of a bump-up in numbers due to Mero 3 (expected first oil by late 3Q24 or early 4Q24), from 2H24 onwards
Analyst:
Miza Izaimi
miza.izaimi@rhbgroup.com
Sean Lim, CFA
sean.lim@rhbgroup.com
$MISC / 3816 (MISC BERHAD)
Research by TA
HOLD – TP RM9.24
"Earnings In-Line, 8 Sen Dividend Declared”
After incorporating an ESG Premium of 5%, we increase our TP to RM9.24/share (previously RM8.80/share) pegged to 16.5x CY25 EPS.Maintain Hold.
Analyst:
Lee Yun Leon
yllee@ta.com.my
Company Face-Off: FPSO Players in Bursa $ARMADA / 5210 (BUMI ARMADA BERHAD) vs $MISC / 3816 (MISC BERHAD) vs $YINSON / 7293 (YINSON HOLDINGS BERHAD).
Floating Production, Storage, and Offloading (FPSO) units are critical assets in the offshore oil and gas industry, particularly for deepwater operations. These vessels are designed to process hydrocarbons produced from subsea wells, store the processed oil, and offload it to tankers for transport. Companies such as Bumi Armada, MISC, and Yinson are key players in the FPSO space. Let’s take a look at how these companies compare against each other.
Which company would you pick to be the best investment? Let us know in the comment section below!
8 Stocks in the Logistics Sector!
The Logistics Sector, which includes land, sea, and air transportation, is crucial to the global supply chain and is often said to be the lifeblood of the economy. When logistics are disrupted, inflation tends to follow as importers and exporters tend to pass through the costs to their customers. Today, we've highlighted eight companies who are key players in the logistics sector. Interestingly, one is currently undergoing a privatization exercise highlighting corporate interest in this area.
Did any of these companies catch your interest? Let's discuss in the comment section below!
$MISC / 3816 (MISC BERHAD) $AIRPORT / 5014 (MALAYSIA AIRPORTS HOLDINGS BERHAD) $TASCO / 5140 (TASCO BERHAD) $WPRTS / 5246 (WESTPORTS HOLDINGS BERHAD) $BIPORT / 5032 (BINTULU PORT HOLDINGS BERHAD)
PETALING JAYA: MISC Bhd has appointed Zahid Osman as its executive director (ED), president and group chief executive officer with effect from Aug 16, 2024.
PETALING JAYA: MISC Bhd has appointed Zahid Osman as its executive director, president and group chief executive officer with effect from Aug 16 2024.
Change in Principal Officer - CAPTAIN RAJALINGAM A/L SUBRAMANIAM
Change in Boardroom - CAPTAIN RAJALINGAM A/L SUBRAMANIAM
Change in Boardroom - ENCIK ZAHID BIN OSMAN
Change in Principal Officer - ENCIK ZAHID BIN OSMAN
OTHERSMISC BERHAD ("MISC" or "the Company") - Changes in Boardroom
OIL & GAS
$MISC / 3816 (MISC BERHAD) $PCHEM / 5183 (PETRONAS CHEMICALS GROUP BERHAD) $YINSON / 7293 (YINSON HOLDINGS BERHAD)
Research by CGS
Overweight
“GloBE impact on PCG, MISC and Yinson”
The Global Anti-Base Erosion (GloBE) rules is an initiative of the OECD and G20, whose purpose is to impose a Global Minimum Tax (GMT) of 15% or more on the profits of Multinational Enterprises (MNE) to prevent them from shifting profits to low tax jurisdictions and deprive countries of their rightful tax revenues. This note explores the impact of GloBE on companies like MISC and Yinson that currently enjoy tax exemption on their shipping and FPSO operations in Malaysia and Singapore. Petronas Chemicals Group (PCG), meanwhile, is enjoying just 3% tax on the profits of its Labuan sales entity, which has depressed its effective tax rate (ETR) to below the GMT of 15% for most years. With Malaysia and Singapore embracing the GloBE rules and committed to collecting GMT of 15% from 1 Jan 2025F, this report assesses how they affect PCG, MISC, and Yinson.
Analyst(s):
Raymond YAP, CFA
raymond.yap@cgsi.com
OIL & GAS
$MISC / 3816 (MISC BERHAD) $DELEUM / 5132 (DELEUM BERHAD)
Research by MIDF
Positive
“Oil and Gas”
Crude oil up +11%yoy. Average Brent crude oil for Jun CY24 gained +10.7%yoy to a monthly average of USD83.01pb. This was a +1.1% increase from CY23 average of USD82.12pb. The gain was due to: (i) China’s steady economic growth momentum in 1HCY24, (ii) extended OPEC+ production cuts until 3QCY24, and (iii) the continuous geopolitical tensions in Eastern Europe and Middle East. This was moderated by increased US crude oil inventory in 1HCY24.
Analyst(s):
MIDF Research
research@midf.com.my
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUMPULAN WANG PERSARAAN (DIPERBADANKAN) (KWAP)
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD