AmInvest Research keeps buy call on MISC, FV RM7.75

MISC FPSO Espirito Santo. MISC is prepared to right size its petroleum tankers by moving into new niche areas with scalable prospects.

KUALA LUMPUR: AmInvestment Research is maintaining its buy recommendation on MISC with an unchanged sum-of-parts based fair value of RM7.75 a share.

In its research note on Wednesday, it said RM7.75 reflects a premium of 3% from its ESG rating of four stars. This also implies an FY21F enterprise value/earnings before interest, tax, depreciation and amortization (EV/Ebitda) of nine times, which is at parity to its two-year average.

During a briefing by MISC president/CEO Yee Yang Chien, the management expects FY21F petroleum tanker rates to average around the same levels YoY given the continuing low Opec output.

“Nevertheless, we believe that charter rates could rise seasonally towards the end of the year given that Opec will be gradually raising crude production quotas by 2.1mil barrels/day from May to July this year in tandem with growing demand underpinned by faster Covid-19 vaccination rollouts in developed markets, ” it said.

AmInvest Research pointed out MISC petroleum segment’s commendable turnaround to a 1QFY21 operating profit of RM34mil from a 4QFY20 loss of RM78mil on a 25% QoQ increase in MISC’s Aframax charter rates, partly offset by a 15% decline in Suezmax and marginal decline in very large crude carriers (VLCC).

It said MISC is prepared to right size its petroleum tankers by moving into new niche areas with scalable prospects, such as securing the charter for six very large ethane carriers for Zhejiang Satellite Petrochemical Co Ltd in July last year.

MISC plans to avoid over-crowded or commoditized markets that offer unexciting margins, which is in line with its 2011 decision to exit the container business.

“Similar to its smooth implementation of low-sulphur emission standards last year, the group is preparing to meet new carbon emission requirements which are being developed by the International Maritime Organization (IMO), ” it said.

Later this month, the IMO will be issuing guidelines on calculations, surveys and verification of the energy efficiency design Index for existing ships, effective in 2023, which will be applicable for all vessels above 400 gigatonnes.

“While the vessel specifications may change going forward, MISC still expects to remain in the petroleum tanker segment by 2050 given the continuing need for the crude transportation.

“Even so, our four-star ESG rating for MISC is affirmed by its commitment to meet its parent Petronas’ net zero emissions target by 2050 by investing into new greener solutions, ” it said.

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