The research house, which maintained its sell rating on the stock, said the LNG segment could pose downside risks as two of MISC's vessels' contracts are set to expire in 2Q and 3Q while another two in 1Q21 will expire with an option to extend.
According to Affin Hwang, the charter vessel market rate has weakened while China and India are trying to invoke a force majeure on NG vessels as demand softens.
It added that LNG importers are calling for a new long-term contractural terms for existing contracts, which could pose risks to earnings.
Ongoing negotiations for production cuts between major oil producers are also unlikely to benefit MISC, said Affin Hwang.
"A potential deal involving Saudi Arabia, the US and Russia in the coming
weeks or months should lead to lower oil production.
"This would have a negative impact on petroleum tanker demand and lead to lower charter rates," it said.
It added that a reduction in production would also lead to smaller inventory build for when demand gradually recovers, which would mean less need for offshore storage.
Affin Hwang does not expect MISC to benefit much from higher tanker rates in the near term as its portfolio mix is weighted towards term versus spot at 78:28, while all of its VLCC vessels are already committed to long-term contracts.
The research house cautioned that MISC's current share trading price is not reflective of the growing downside risk, especially for its LNG segment.
"We make no change to our SOTP-based 12-month TP of RM6.20, which implies a 2020E PER of 16x, slightly below the past-15-year average," it said.
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