PETALING JAYA: MISC Bhd
’s latest contract win is expected to strengthen its long-term earnings visibility and support recurring cash flows from 2030, while expanding its liquefied natural gas (LNG) shipping capacity without exposing the group to spot market volatility.
The addition of five newbuild LNG carriers or LNGCs is also expected to reinforce the group’s gas shipping business, although the benefits will take several years to materialise, as construction costs and financing expenses weigh on returns in the initial years of operation.
Kenanga Research said the contract win was positive as it would be earnings accretive, with long-term charters secured by the Petroliam Nasional Bhd (PETRONAS) group reducing market risks. It estimated that the five vessels could contribute RM162mil to MISC’s financial year 2026 forecast earnings base, or 6%, based on its assumptions.
“No details of the charter have been announced but we took the liberty to assume US$90,000 per day and at an internal rate of return of 8%, giving a discounted cash flow accretion of 10 sen per share using a weighted average cost of capital of 7%,” it said.
The research house assumed capital expenditure (capex) of US$220mil per vessel, putting the total at US$1.1bil. It expects 70% of the expenditure to be debt-funded, with MISC’s RM7.2bil cash balance sufficient to cover the remaining US$330mil equity portion.
However, Kenanga Research noted that returns on new LNG vessels were less attractive than a decade ago, as daily charter rates had remained relatively stable over the past three years while newbuild costs continued to rise amid supply chain pressures and tighter shipyard capacity.
It maintained its earnings forecasts but raised its target price for MISC to RM9.30 from RM9.20, retaining its “outperform” rating. It cited MISC’s exposure to the global petroleum tanker market, recurring earnings that support consistent dividends and growth potential in LNG shipping amid rising energy security concerns.
MBSB Research also viewed the project as a low-risk, defensive growth strategy, maintaining its “buy” call and RM9.22 target price. It made no changes to its earnings estimates, given that the vessels are expected to be completed in 2030.
“We expect that the firm charter duration guarantees predictable, annuity-style cash flows starting in 2030, securing long-term earnings visibility for MISC’s Gas Assets & Solutions division,” the research house said.
It estimated that the five vessels could generate additional annual revenue of at least RM600mil, with the division’s earnings before interest and tax margin potentially expanding by two to three percentage points.
MBSB Research estimated total capex at RM5bil to RM6bil from 2027 to 2030. It cautioned that debt servicing and interest expenses could constrain net earnings during the first five years of operations, from 2030 to 2035, before earnings accelerate as principal repayments decline.
MISC announced that it had accepted a letter of award from PETRONAS LNG Ltd for long-term charters of five newbuild LNGCs. The group will enter into shipbuilding contracts with Hudong-Zhonghua Shipbuilding Co Ltd for the vessels, with charter commencement expected in 2030.
One analyst told StarBiz that the contract would improve MISC’s earnings prospects and support the group’s long-term growth.
“While the returns will take time to materialise, the deal positions MISC to benefit from rising demand for LNG transportation,” he said.
