INVESTORS, especially local institutional funds, are beginning to shift some of their portfolio funds into shares of Petronas Gas Bhd and Malaysian International Shipping Corp Bhd (MISC) amid growing fears of a US-led strike against Iraq.
This is evidenced by the good run-up in the prices of the two stocks over the past few weeks.
Since Jan 2,both Petronas Gas and MISC, deemed to be defensive stocks and laggards in the broader market, have enjoyed healthy gains of 14% and 10% respectively. Over the same period, the KLSE Composite Index (CI) was up only 5%.
Yesterday, Petronas Gas rose a further 35 sen to RM7.30 on heavy volume of 2.7 million shares, while MISC closed 30 sen higher at RM7.50, despite a dip in the overall market following the sharp fall on Wall Street last Friday.
A dealer with a local stockbroking firm said there was a general belief in the market that the newly established ValueCap Sdn Bhd was also behind the recent rise in the share prices of Petronas Gas and MISC, although this could not be verified.
The dealer, who declined to be named, said historically, both stocks were not favoured by retail investors because they offered little price volatility and the bulk of their free float was held by local fund managers.
Some oil and gas analysts also pointed out that both Petronas Gas and MISC, both subsidiaries of national oil company Petroliam Nasional Bhd (Petronas), were not expected to benefit much from higher oil and gas prices.
Petronas Gas, they say, is merely a conduit to process and transmit gas to end-users. The company receives a fixed sum of RM136mil every month for processing and transmitting natural gas for its parent.
As for MISC, the nation’s largest liquefied natural gas (LNG) shipper for Petronas, it is actually incurring higher costs as a result of the higher insurance premiums imposed after the Sept 11, 2001, incident.
On the other hand, one analyst said, Petronas Gas could potentially benefit from higher drilling activities by Petronas in the region, especially when the planned RM2bil Malaysian-Thai natural gas pipeline project would kick off.
The project, a joint venture between Petronas and the Thai petroleum authority, involves extracting natural gas from a development area shared by both countries in the South China Sea.
The gas will be pumped through 340km of submarine pipeline to Chana, a district in Thailand’s Songkhla province, and then sent through 100km of land-based pipelines via Sadao to Changloon in Kedah.
The analyst said Petronas Gas could be a winner in the project as it stood a good chance of securing the contract to process the natural gas.
MISC offers less excitement in the immediate term, in the view of the analyst. Although it recently indicated an interest in acquiring a stake in American Eagle Tankers Ltd, a unit of Singapore’s Neptune Orient Lines Ltd (NOL), it has yet to enter into any formal agreement.
The analyst believes, however, that MISC, currently the largest LNG shipping company in the region, is positioning itself to become a leading global player by taking advantage of the general weakness in the industry.
He observed that MISC, despite experiencing a steady decline in profits over the past year or so, had performed reasonably well and managed to stay in the black.
MISC is also venturing into the very large crude carrier (VLCC) segment of the market, placing an order for a 298,100 deadweight tonne vessel from Hitachi Zosen in Kyushu, Japan.
The new vessel is expected to be delivered by April this year and is part of MISC’s RM500mil crude oil carriage contract with Petronas.
Crude oil carriage has not been affected by the decline in freight rates and the hike in insurance premiums. VLCC rates are high with charter prices of up to RM315,000 per day.
MISC was in the limelight recently when it tried to acquire a 51% stake in Shipping Corp of India. That deal, however, fell through as the Indian government did not want to lose its controlling stake in the shipping company.