Kenanga Research said the newbuild vessels would be chartered to PETRONAS LNG for 20 years from 2029, providing MISC with stable, recurring earnings visibility over the long term.
PETALING JAYA: MISC Bhd
has secured long-term contracts to build and operate three new liquefied natural gas (LNG) carriers for PETRONAS LNG Ltd, reinforcing its position as a core shipping partner to the national oil company while supporting fleet renewal.
In a company update published yesterday, Kenanga Research said the newbuild vessels would be chartered to PETRONAS LNG for 20 years from 2029, providing MISC with stable, recurring earnings visibility over the long term.
The vessels will be constructed by Hudong Zhonghua Shipbuilding Group in China and delivered to MISC in 2029.
“This is a positive for MISC, enabling it to replace lost earnings from its older LNG vessels which have seen their long-term contracts expired,” Kenanga Research said, adding that the awards also reflected Petroliam Nasional Bhd (PETRONAS) group’s commitment to renew its LNG fleet and intention to grow its LNG export business.
While the contracts strengthened MISC’s long-term fundamentals, the research house cautioned that the economics of new LNG vessels are less attractive than those of its older fleet. LNG carrier construction costs had risen significantly while charter rates had retreated from the highs seen during the 2022 energy crisis.
Kenanga Research noted that daily charter rates had weakened to about US$90,000 per day compared with a peak of US$200,000 per day in 2022, while capital expenditure per vessel had remained similar.
“The new LNG carriers will not be as lucrative as its older fleet namely Puteri class vessels as LNG capital expenditure costs have risen throughout the years while rates are still moderate,” the research house said. It assumed a construction cost of US$250mil per vessel, in line with prevailing market prices for 174,000-cubic-m LNG carriers.
Based on a project internal rate of return of 7%, a weighted average cost of capital of 6.1%, and a 75% debt funding structure, it estimated a discounted cash flow value of RM227mil, translating into an accretion of five sen per share.
The project is expected to contribute RM83mil in profit before tax annually to MISC, or about 4% of Kenanga Research’s pre-tax forecast for the financial year ending December 2026 for the group.
Despite the sizeable capital commitments, the research house had decided to keep its earnings predictions for MISC unchanged. Following the contract wins, Kenanga Research has raised its sum-of-parts target price marginally to RM8.70 from RM8.65 and reiterated its “outperform” recommendation on the stock.
