Affin Hwang Research cautious on MISC earnings outlook

MISC Bhd is selling its 45% stake in Centralised Terminals Sdn Bhd (CTSB) to Dialog Group for RM193mil as it seeks to focus on energy related maritime services.

KUALA LUMPUR: Affin hwang Capital Research remains cautious on MISC’s earnings in the coming quarters due to lower charter rates on the back of oversupply of tonnage for the petroleum and liquified natural gas (LNG) segments as well as lower order book for the heavy engineering segment. 

In its research note issued on Thursday, it maintained its Sell call with target price of RM6.50, which is 11% below the closing price of RM7.33 the previous day.

MISC reported 2Q17 results with its revenue down 3.8% on-year to RM2.3bil, underpinned by lower revenue from petroleum and heavy engineering segments. 

The 2Q17 core net profit increased by 28.9% on-year, after excluding losses from impairment and disposal of PPE. 

“1H17 net profit comprised 63% and 58% of our and consensus 2017 estimates,” it said.

Despite recording higher revenue from the LNG segment (+15.8% on-year) and offshore segment (+31.3% on-year), MISC’s total revenue in 2Q17 decreased by 3.8% on-year to RM2.3bil.

This was primarily underpinned by: (i) lower revenue from the petroleum segment due to lower charter rates; (ii) lower revenue from the heavy engineering segment as most on-going projects are nearing completion; and (iii) lower construction revenue recognised for FSO Benchamas 2. 

Net profit in 2Q17 was 59.1% lower compared to 2Q16 due to net gain on acquisition of subsidiary in 2Q16, amounting to RM847.3mil.  

 “MISC booked a net profit of RM551.1mil in 2Q17, which declined 18.5% on-quarter. While petroleum and heavy engineering segments reported operating loss of RM20.1m and RM10.3m respectively this quarter, operating profit of LNG increased significantly by 69% on-quarter to RM557.7mil due to compensation for early termination of contract and lower operating costs. 

“Core net profit increased by 29.1% on-quarter as we exclude: (i) impairment loss of RM133.6mil on ships and PPE; (ii) RM17.2mil net loss on liquidation of subsidiary, MISA Japan; and (iii) loss of RM2.4mil on disposal of PPE,” it said.