HLIB Research said MISC’s offshore business is entering into a new chapter.
PETALING JAYA: MISC Bhd
now has the ability to bid for more new floating production storage and offloading (FPSO) projects as well as complete its future jobs, say analysts.
Following a recent site visit to the group’s Mero 3 FPSO vessel at the CIMC Raffles Shipyard in Yantai, China, TA Research said it came back feeling more confident on the maritime conglomerate’s Mero 3 execution and its prospects.
“We believe MISC will be the top contender for future FPSO projects, considering Mero 3’s clean audit and exceptional safety profile,” the research firm added.
TA Research said Mero 3 will be the first FPSO to head directly to Brazil’s Mero offshore oil field without stopping for further audit.
“Mero 3 also broke the record by achieving more than 28 million safe man-hours with zero lost time to injury,” it noted.
Mero 3 is MISC’s first FPSO contract with an international client, which is not linked to its majority shareholder, Petroliam Nasional Bhd (PETRONAS)
According to MISC’s management, Mero 3 also qualifies as the highest tier of project, in terms of complexity, from Brazilian oil and gas group, Petrobras.
“We understand that MISC is currently bidding for other FPSO projects in Brazil and West Africa. The group intends to cap the construction of FPSO projects at one big and one small FPSO at any given time,” TA Research said.
The research firm, which made no changes to its earnings forecasts for MISC, maintained a “buy” call on the stock with an unchanged target price (TP) of RM8 per share.
Meanwhile, Hong Leong Investment Bank Research (HLIB Research) said MISC’s offshore business is entering into a new chapter.
“After six months of delay from its initial deadline, the Mero 3 FPSO is finally undergoing the commissioning phase. Mero 3 will sail away on Feb 18 and arrive off Brazil in mid-May,” HLIB Research said.
The research house said MISC will likely gain one month of standby charter at about 90% of bareboat rates in July, while awaiting the first oil to be achieved in August, leading to final acceptance and full recognition of bareboat charter.
“We estimate the charter rate of Mero 3 to be at US$700,000 per day,” HLIB Research noted.
Furthermore, the research house said the successful completion of Mero 3 opens doors for future FPSO projects with similar complexity and scale.
“Our checks indicate that MISC is bidding for new FPSO projects in Brazil, which they were not qualified for pre-Mero 3 and does not rule out participating in new projects in Africa,” it added.
Taking cue from MISC’s management, HLIB Research believes MISC is now more open to new FPSO jobs and is comfortable with working on a new mega FPSO project and a mid-sized floater concurrently.
“The projects MISC is looking at will likely be floaters for one of the oil fields which Petrobras will be dishing out, such as, FPSOs for the Barracuda-Caratinga, Marlim Sul-Marlim Leste fields, as well as two floaters for the Sergipe-Alagoas basin,” the research house noted.
Pending the group’s results for the fourth quarter of financial year 2023 set to be announced on Feb 27, HLIB Research made no changes to its forecasts on MISC.
It maintained a “hold” call on the stock with an unchanged TP of RM7.48 per share.
“We view MISC’s risk and reward profile as balanced at this juncture. With a dividend yield of 4.8% for FY23-FY25, we reckon the stock may not be an attractive dividend name for the time being,” HLIB Research said.
