Maybank IB Research sees bright growth prospects for MISC


  • Analyst Reports
  • Thursday, 05 Sep 2019

MISC is tendering for at least five offshore jobs in Brazil, Malaysia, Thailand and Qatar.

KUALA LUMPUR: Maybank Investment Bank Research believes growth prospects are bright for MISC as it sees a high probability of the company winning a few sizable offshore jobs in the near-term.

This is made possible by the tight floating production storage and offloading (FPSO) market and MISC’s strong operating cashflow/balance sheet, it said on Thursday.

“We maintain our earnings forecasts. Our sum-of-parts based TP is raised to RM7.70 (+7%) as we impute for jobs with US$2.1b capex at 50% possibility. Upgrade to Buy (from Hold). Stock has yet to reflect the new job prospects, trading at a 12 months forward P/E of 18 times (five-year mean: 19 times), ” it said.

Maybank Research said MISC hosted their yearly CEO-Sell side engagement session on Wednesday.

It said MISC management was confident of operating cashflow of US$1.1bil to US$1.2bil in FY19F (1H19: US$640mil), implying a growth rate of more than 8% YoY. Operating cashflow would grow in FY20F underpinned by the deliveries of seven new dynamic positioning shuttle tankers.

Management targeted growth capex of US$1bil in FY19F, implying a slew of job awards in 4Q19 while its tender pipeline was more than US$4b capex, the bulk of which would be in offshore projects and some in LNG as well as petroleum segments.

“MISC is tendering for at least five offshore jobs in Brazil, Malaysia, Thailand and Qatar. We think MISC has a high probability of securing two jobs.

“(i) Petrobras’ Mero 3 or FPSO (Brazil) – management guided to capex of US$2bil. The tender will close in December 2019 with the award expected in April 2020 and the operation will commence in 2024. Competition is limited for the other two tenderers already have their plates full/close to full;

“(ii) Petronas’ Limbayong FPSO (Malaysia) - capex is US$600mil to US$800mil. The job could be awarded in 4Q19 and commence operation in 2022, ” it said.

Maybank Research said that assuming capex of US$2.1bil over three years, capex could be RM2.9bil per annum.

It said that in its earnings model, it had already assumed for capex of RM3.5bil per annum in FY19-21F. It projects MISC’s net gearing to be comfortable at 25%-31% in FY19-21F and the group will still be able to pay its usual 30 sen dividend per share yearly.


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