KUALA LUMPUR: HLIB Research has downgraded MISC to Sell with a higher target price of RM8.08 as it believed market has overpriced the rebound in Petroleum charter rate and LNG contracts.
In a note on Tuesday, the research house said MISC reported 1Q15 core profit of RM495.7mil, achieving 22.8% of HLIB’s FY15 earnings and 22.5% of consensus.
"We deem the result relatively weak, given 1Q is traditionally stronger quarter of the year," it said.
It added that its LNG segment posted lower earnings day due to expiry of 2 Puteri Classcontracts (sent for refurbishments).
Earnings are expected to maintain weak within the next 1-2 years, given the continuous refurbishments (up to 100 days) for the expiring Puteri class LNG tankers and lower renewed charter rates (competitive market), before earnings rebound with the new LNG deliveries (from Petronas) by 2H16.
For its petroleum business, HLIB said it will benefit from the strong charter rates, which has seen earnings jumped to US$18.3mil (highest since 1Q10).
Management guided rates to seasonally weaken in 2Q-3Q, before uptick in 4Q. Unfortunately, most of AET fleets are locked in time charter, before renewal in 2016-2017, which may miss the current strong charter rate cycle.
Its chemical charter rates remained weak, due to slowdown in global economic activities (especially China). Nevertheless, MISC has reduced its fleet size to cut losses, it said.
For offshores, its post maiden contribution from FPSO Cendor in 4Q14, earnings are expected to remain consistent due to their long term contract nature.
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