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Thursday, November 14, 2019

RHB upgrades MISC to 'Buy', raises TP to RM9.21


Thursday, 14 Nov 20199:04 AM MYT

KUALA LUMPUR: RHB research has upgraded MISC BHD
to a buy rating with a higher target price of RM9.21 following the release of 9M19 earnings that came within estimates.

"Our key reasons for the upgrade are: Better tanker rates in 2020 on tight vessel supply, strengthening operating cash flow, and continuous contract flows from major segments," it said in a note.

The research house said 9M19 numbers rose 24% year-on-year to RM1.2bil on the back of improved contributions from the LNG division and a turnaround in the petroleum segment.

"At 65% and 67% of full-year estimates, the results are deemed within our and consensus expectations, in view of a seasonally-stronger 4Q19," it said.

Moving forward, MISC may benefit from a surge in tanker rates, given that 40% of its petroleum tankers are in the spot market, says RHB.

The research house is expecting further growth in average spot charter rates for petroleum tankers due to tighter vessel supply with more vessels undergo scrubber retrofitting post IMO2020.

MISC could also generate US$5mil in cost savings per annum or 2% if FY19F earnings following the disposal of its chemical tanker this quarter, and the expected disposal of the remaining six vessels in the next six months.

On the offshore segment, MISC is bidding for several projects worth US$3.5bil in Malaysia, Qatar, Vietnam, Thailand and Brazil, of whih the largest is Petrobras' FPSO Mero 3 project.

"While we believe the company appears to be a good JV partner – backed by its strong balance sheet – we have yet to factor any contract win within the premium leased FPSO market," said RHB.


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