UOBKH Research said MISC’s petroleum division’s strength should mitigate downside risks and protect its dividend obligation.
PETALING JAYA: MISC Bhd
’s petroleum division is expected to remain strong, shielding downside risks especially for its liquefied natural gas (LNG) and offshore divisions.
UOB Kay Hian (UOBKH) Research said MISC’s petroleum division’s strength should mitigate downside risks and protect its dividend obligation.
The research house added that despite geopolitical risks and market turmoil, crude tankers’ fundamentals remained strong.
“The Organisation of the Petroleum Exporting Countries and allies’ (Opec+) new stance in supply management against tariffs and structural shifts in crude demand/refinery developments could generate short-term deviations in tanker spot rates, but time charter rates are still expected to remain strong,” UOBKH Research said in a report yesterday.
The research house said in the long run, the global crude tanker fleet would remain tight, as the aged/sanctioned tanker mix remained substantially higher versus order book.
“This underpins the strong outperformance of Drewry’s Crude Shipping Index which is up 37% year-to-date) versus the broader market (Russell 2000, up 7% year-to-date),” UOBKH Research said.
The research house said there are “many feel-good market factors for crude tankers”. At the core of these is the continued pace of Opec+’s unwinding of production cuts.
“As we have passed the summer months (namely, the period when nations like Saudi Arabia consume more oil domestically for power usage), and alongside growth in non-Opec supply, Teekay Tankers, we saw global seaborne crude trade volumes surge past 45 million barrels per day (mbpd) in September 2025,” UOBKH Research said.
Meanwhile, UOBKH Research said offshore and LNG divisions are still facing earnings risk.
For LNG, the research house retained its assumption that LNG earnings would still look weak for the second half of 2025 as MISC is going through its fleet rejuvenation programme (to replace its aged steam-turbine LNG carrier that had expired).
“We guided that this fleet rejuvenation will only be fully completed (and hence, the resolution of this earnings risk) by 2027,” UOBKH Research said.
For the offshore division, the research house noted the floating production storage and offloading (FPSO) Marechal Duque de Caxias (Mero-3) is operating well and is expected to be a key cash flow contributor in the long run.
“Since its first oil on Oct 30, 2024, the FPSO had lumpy closed-out costs in 2024, but achieved peak production capacity in May 2025.
“However, due to the complexity of the project, we understand that the cash flow generation from FPSO Mero-3 is not expected to reach steady state within the 2025 horizon.
“We assume that the efficiency of the FPSO is at 85% to 90%,” UOBKH Research said.
To recap, MISC strives to achieve its MISC2030 targets, which includes a 50% operating cash flow growth from the 2022 base, with a 25% operating cashflow growth to come from new energy and decarbonisation (NED).
“NED had operationalised with operating cash flow of RM199mil/RM285mil in 2023/2024 respectively. However, we were not guided on the per-segment costs incurred for NED so far.
UOBKH Research maintained its “buy” call for MISC with a sum of parts based target price of RM8.70.
The research house advised accumulating on weakness as MISC weathers the near-term weak LNG outlook, which will be rebalanced by early deliveries of long-term charters, and the removal of the FPSO merger uncertainties.
