KUALA LUMPUR: Affin Hwang Capital Research has upgraded MISC Bhd
to hold despite lowering its target price to RM6.10.
The research house said it sees limited downside moving forward as the counter's share price recently corrected by 14%.
It noted that MISC's management is expecting weaker 2018E profit and a 10% drop in US$ operating cash flow, but intends to maintain its 30 sen dividend per share for a 5% yield.
Affin Hwang said it projects a 7% on year US$ earnings growth for the LNG segment underpinned by new LNG deliveries. However, it added that the operational growth will be unlikely to fully cover the appreciation in the ringgit, which poses as an about 12% downside risk.
Further impacting MISC's bottom line, the research house expects the petroleum shipping segment's loss to widen in FY18E as spot charters continue to decline coupled with newbuild deliveries flooding the oversupplied market.
"MISC’s fleet of petroleum tankers are exposed and sensitive to the low spot charters as 45% of its total fleet are on spot contracts.
"Similar to LNG, the currency factor will likely play a role in widening the losses," it said.
Affin Hwang trimmed its FY18-20E earnings per share by 8% to 12% as it factors in lower profit margins for the LNG and petroleum segments while assuming a 30% on year increase in capex due to upgrading and growth expansion projects.
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