MISC fiscal 2020 forecast earnings cut


MISC’s third quarter core net profit of RM64mil was 4% lower year-on-year, as a result of a higher number of LNG off-hire days due to dry docking, while offshore earnings also fell due to the expiry of the FSO Angsi contract in December 2019. (File pic shows MISC's LNG tanker Camellia.)

PETALING JAYA: MISC Bhd’s forecast earnings for its financial year 2020 (FY2020) has been cut after the company missed consensus estimates for the first nine-month period. Weaker tanker rates are also expected to weaken the earnings outlook.

CGS-CIMB Research, for one, has cut its forecast core FY2020 earnings by 18% on the back of reduced earnings estimates for the liquified natural gas (LNG) and AET businesses.

“MISC’s third quarter core net profit of US$64mil was 4% lower year-on-year, as a result of a higher number of LNG off-hire days due to dry docking, while offshore earnings also fell due to the expiry of the FSO Angsi contract in December 2019.

“More dramatic is the fact that Q3 core net profit was down 43% quarter-on-quarter (q-o-q) from Q2 at RM113mil and made up just one-third of the Q1 at RM187mil, due to substantially weaker tanker and LNG performances, ” it said in a report yesterday.

The research house said MISC’s core profits for the first nine-month of 2020 were below expectation by 67% of its estimate and 72% below consensus for FY2020 due to weaker-than-expected tanker performance.

UOB Kay Hian Research noted that although MISC had boosted the time charter (TC) mix in its petroleum segment in the Q2, petroleum EBIT fell sharply q-o-q as some Aframax vessels were diverted to the loss-making spot markets in view of a crash in US lightering demand.

“For the LNG segment, MISC saw at least one of its vessels experiencing off-hire days as the vessel was faced with Covid-19 cases, and this caused LNG EBIT to decline, ” it said.

Lightering demand had crashed severely in Q3 because of lower US crude exports and refinery activity.

During the quarter, the US faced oil demand destruction from Covid-19 infections and hurricane incidents that shut down many of its refineries. “Hence, this resulted in many of MISC’s Aframax vessels being forced to be employed in the loss-making spot markets, ” UOB said.

While 2020 is shaping up to be a gloomy one for MISC, AllianceDBS Research foresees stronger earnings in FY21 and FY22 as the group takes on more vessel deliveries.

“Improving rates should also help support FY21 earnings. MISC has been actively securing jobs from third-party players, thereby broadening its customer base and reducing dependency on Petronas, ” it pointed out.

Shares of MISC closed at RM6.90, down 51 sen.

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