AmInvestment maintains 'buy' on MISC

KUALA LUMPUR: AmInvestment Bank Research has maintained its "buy" call in MISC Bhd following its announcement that it has secured long-term charter contracts to own and operate three newbuild LNG dual-fuel very large crude carriers from Shell Tankers (Singapore) Pvt Ltd.

The research house has an unchanged sum-of-parts-basd fair value of RM8.50 a share, which implies an FY21 foreacst EV/Ebitda of 9x, at parity to its two-year average.

MISC did not reveal the capex or charter rates of the vessel although AmInvestment assumes a total capex of US$282mil for the three vessels, which could be part of the group's growth capex of US$1bil annually.

"Assuming 3-year VLCC charter rates of US$28K/day over 20 years and operating costs of US$6K/day, we estimate that these charters could generate a mild project IRR of 6% and

slight impact to FY23F earnings.

"Hence, we maintain MISC’s FY21F–FY23F earnings," it said.

Meanwhile, AmInvestment expects tanker rates to remain depressed 1H2021 due to the extension of Saudi Arabia's quota in April and weak crude demand amid rising global tonnage.

"Nonetheless, we estimate that the additional construction earnings from the US$2bil Mero-3 FPSO project should be able to offset this main drag from the tanker segment in 1HFY21.

"By 3QFY21, with the global rollout of Covid-19 vaccinations, we are optimistic that improving economic growth prospects and rising transportation needs will support higher tanker rates towards the traditional seasonal end of the year," said the research house.
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