PETALING JAYA: Anticipation of a better year ahead for crude oil tankers will be a boon for MISC Bhd, a provider of international energy-related maritime solutions and services.
CGS-CIMB Research in its latest report said potential re-rating catalysts for MISC included a strong recovery in the crude tanker freight rates this year. This is given that the Organisation of the Petroleum Exporting Countries and its allies (Opec+) and non-Opec nations are likely to raise output in 2022 on the back of very strong price stimulus, it noted.
“China may also import more crude this year, Iran may re-enter the export markets if it comes to an agreement with the United States on its nuclear programme, and the likelihood that Europe will import crude oil from more distant sources instead from Russia.
“This could also raise the annual tonne-mile demand for tankers for the first time after three consecutive annual declines,” added CGS-CIMB Research.
Furthermore, the reopening of Malaysia’s international borders on April 1 could also help boost the marine service and repair volumes of MISC’s unit, Malaysia Marine and Heavy Engineering Holdings Bhd shipyard.
For these reasons, the research house has reiterated an “add” call on MISC with a higher target price of RM8.36.
“Our target price has been increased from RM8.23 previously, because we now assume that second-hand liquidation values of the crude tanker fleet at end-2022 will be 20% higher than the values prevailing at end-2021, from 10% previously.
“This is because crude tanker second-hand liquidation values in early-April have already appreciated by 10% against end-2021 values,” explained CGS-CIMB Research.
The research house also expects the second-hand tanker values to continue rising, “as we are bullish on crude tanker freight rates for the rest of this year”.
Meanwhile, MISC is also working on several floating production, storage and offloading (FPSO) and liquefied natural gas (LNG) shipping tenders.
“The clients may award the time charter contracts in 2022 with the potential Atlantic Basin FPSO contract involving a capital expenditure of US$1bil to US$2bil (RM4.2bil to RM8.5bil),” the research house said.
As FPSO contractors are currently very busy, MISC expects a suppliers’ market and better pricing power. MISC is also planning to participate in bids for various LNG and ethane carrier time charter contracts.