RHB Research is retaining its Buy call for MISC as the hearing for a counterclaim from Sabah Shell Petroleum over the adjudication decision awarded in February 2017 is expected to be heard in 2019.
KUALA LUMPUR : AmInvestment Research downgraded its rating on MISC Bhd
to "Hold" with a lower fair value of RM9.25 due to the steep fall in petroleum spot charter rates.
In a note on Friday, the research house made the adjustment ahead of MISC's first quarter results for the 2016 financial year (1QFY16) which is expected to be announced at midday.
It previously had a "Buy" call on the stock with a fair value of RM10.30 per share.
“We expect MISC's 1Q results to be weak given that petroleum spot charter rates have fallen by between 35% and 46%.
"While most of MISC's charters are secured on long term rates, we expect these trends to reflect prevailing spot rates given that the tanker demand remains lacklustre,” it said.
According to AmInvestment, Aftermax spot charter tanker rates have dropped by 28% since December last year to US$35,000 a day in March due to weak global demand and high utilisation of storage facilities which slowed doen the global movement of crude oil.
On the other hand, long term tanker charter rates declined at a slower rate compared to spot prices. Three-year VLCC rates decreased by just 5% while Suezmax and Aframax rates declined by 5% and 8% respectively.
“Additionally, liquefied natural gas (LNG) rates were also weak with spot rates falling by 19%. LNG remains MISC's bread and butter, accounting for 55% of its 4QFY15 pretax profits,” it said.
Meanwhile, the research house said that operational costs for the company are expected to moderate further as bunker costs, accounting for 16% of FY15 operating expenses, have fallen by 10% on a quarter-to-quarter basis and 46% on a year-on-year basis to US$178 per tonne.
As at 10:50AM today, MISC's shares were last traded at RM8.32, or a three sen decline from Thursday's close.
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