PETALING JAYA: The petroleum tanker segment of MISC Bhd, while still in an oversupply situation, could be on the cusp of a turnaround as new vessels entering the market are expected to slow down, said RHB Research in a report.
“In the near term, we expect rates for petroleum tankers to continue to be soft due to an oversupply. However, we expect the tanker market (to) turn around as newbuild orders are slowing down,” RHB said.
UOB Kay Hian (UOBKH) is more conservative with their forecasts, saying that it remains bearish on the near-term market trend of tanker rates.
“The increasing tonnage supply as soon as the first quarter of 2017 could result in weak petroleum earnings.
“We have already factored in a conservative liquefied natural gas (LNG) earnings before interest and taxes (due to the effects of termination), increased depreciation charges in line with MISC’s new policy since the first quarter of 2016 where crude/chemical tankers are now depreciated for 20 years versus 25 years, while the LNG vessels are depreciated by up to 25 years versus 30 years,” UOBKH said in their report.
It noted that by 2018, the higher revenue on LNG and petroleum segments would be from the contributions of new vessels.
RHB said the LNG and the offshore segment would continue to provide stable earnings coupled with visible growth for MISC.
“We continue to be positive on MISC and maintain a buy call with a sum of parts based target price of RM8.72.
“Our adjustment in earnings and target price come mostly from the full consolidation of Gumusut-Kakap Semi-Floating Production System (L) Limited, increasing MISC’s borrowings and currency forecast adjustment,” RHB said.
UOBKH said in their report that MISC’s core profit of RM1.9b was in line with its estimates but missed consensus accounting for 103% of its conservative full-year estimate and 90% of consensus.
On a quarter-on-quarter basis, UOBKH said the better performance came from the petroleum division (seasonally higher tanker rates) and the offshore side with more demobilisation activities for two mobile offshore production units (MOPUs) and floating storage and offloading (FSO). Hong Leong Investment Bank (HLIB) Research said in a report that MISC’s two new LNG vessels that will be delivered in 2017 would be negated by a downward revision of rates for one existing LNG vessel upon extension of the contract.
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