"Overall, we feel positive on the new wins, seeing them as undoubtedly earnings accretive.
"These long-term charters will further strengthen MISC’s LNG segment, which currently is its largest earnings contributor, as well as minimising the group’s exposure to spot charter rates – in line with management’s overall strategy of increasing cash flow visibility of the group moving forward," said the research house.
It said the contract should have an internal rate of return of about 10%, contributing about RM300mil a year in combined earnings.
Kenanga maintained its "outperform" rating on the stock with a slightly increased target price of RM8.90 from RM8.85 previously, on the back of a 12% higher forecast of FY21 core net profit.
The contract is expected to commence in 4QFY20. The vessels will be constructed in shipyards in Korea by Samsung Heavy Industries and Hyundai Heavy Industries, and will have a capacity of 98,000 cubic metres.
Kenanga said it likes MISC as a defensive dividend play, especially among blue chip counters although investors should be wary of possible upcoming earnings weakness owing to weaker spot charter rates post-April 2020.
"Nonetheless, any further dips could represent an entry opportunity for yield seeking investors, with its consistent dividends providing a resilient support to share prices, it said.
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