MISC Bhd is expected to have “pulled through” a difficult fourth-quarter 2021 (Q4’21), after performing “admirably” in Q3’21 despite tepid spot rates in both the liquefied natural gas (LNG)/petroleum segments.
Maybank Investment Bank’s (Maybank IB) research arm said this in a report to clients, adding that the company, which is involved in international energy-related maritime solutions and services, had a petroleum fleet with a favourable term-to-spot ratio that could provide some support for its Q4’21 performance.
“MISC’s spot charter exposure between its very large crude carriers (VLCCs), Suezmax, Aframax vessels at end-Q3’21 stood at 13%, 27% and 46%, respectively.
“As such, notwithstanding a 32.6% month-on-month (m-o-m) decrease in December spot rates for VLCCs, marginal m-o-m increases in Suezmax (9.7%) and Aframax (4.9%) rates could provide the necessary support as MISC’s spot exposure in these segments are more substantial,” it told clients in the report.
The investment bank’s research unit said with MISC’s Mero 3 floating production system or FPSO continuing to accrete positively to the company’s bottom-line, coupled with the Organisation of the Petroleum Exporting Countries or Opec’s recent decision to stick by its planned output bumps in light of soaring global oil prices and record-low global crude inventories, it was making no changes to its forecasts, pending better visibility post-Q4’21 results.
The research house also said it was maintaining its “buy” call on the MISC stock, as well as its target price of RM7.75 for it, at this juncture.
Nevertheless, it warned that there were several risk factors affecting its earnings estimates, target price and rating for MISC.
“Abrupt changes in the momentum of petroleum tanker rates and bunker prices may lead to lower earnings for MISC,” it said.
It added that the re-imposition of global economic lockdowns as a result of new Covid-19 virus strains and abrupt changes in Opec policy could also result in near-term earnings volatility for MISC.
“Additionally, a sharp appreciation of the ringgit vis-a-vis the greenback will also affect its earnings, as the group’s revenue is almost entirely derived in US dollars.
“Lastly, disruptive force majeure events in relation to the construction of the Mero 3 FPSO could also pose a drag on MISC’s earnings,” Maybank IB said.
MISC’s net profit rose 55.3% to RM401mil in Q3’21 from RM258.3mil in the corresponding quarter last year, thanks to a higher contribution from its offshore business and LNG Asset Solutions segments.
During the quarter in review, the group’s revenue increased 30.7% to RM2.69bil from RM2.06bil due to income recognition from the conversion of a FPSO vessel.
The board of directors also declared a third interim dividend of seven sen per share for that period.
Source: The Star