MISC Bhd is expected to have a better second half of 2022 (2H22) performance driven by stronger petroleum earnings as freight rates recover, according to Affin Hwang Capital.
The research house said spot liquefied natural gas (LNG) shipping rates had been on the rise, driven by the tighter tanker market, higher European Union (EU) exports amid ongoing Russia sanctions.
This positive trend is expected to continue, supported by higher tonne-mile and long-haul demand as the EU pivots away from Russian gas supply.
“Four of its total 30 LNG fleet on spot charters are due for renewal in 2023 and would be able to capitalise on the higher spot rates.
MISC Bhd is expected to have a better second half of 2022 (2H22) performance driven by stronger petroleum earnings as freight rates recover, according to Affin Hwang Capital.
The research house said spot liquefied natural gas (LNG) shipping rates had been on the rise, driven by the tighter tanker market, higher European Union (EU) exports amid ongoing Russia sanctions.
This positive trend is expected to continue, supported by higher tonne-mile and long-haul demand as the EU pivots away from Russian gas supply.
“Four of its total 30 LNG fleet on spot charters are due for renewal in 2023 and would be able to capitalise on the higher spot rates.
MISC has nine newbuilds due for delivery with an estimated less than RM50 million per vessel additional profit contribution from 2025/2026 onwards,” it said.
Affin Hwang lifted its 2022-2023 earning per share (EPS) forecasts for MISC by four per cent to factor in higher petroleum and LNG tanker rates.
The firm also raised its target price to RM7.10 from RM6.95 previously, which implied a 17.3 times 2023 price earning (PE).
While the near-term earnings outlook has turned more favourable, rate volatility and floating production storage and offloading (FPSO) Mero-3 execution risk may see investors preferring to stay on the side-lines, especially under this heightened market uncertainty.
“MISC has made further inroads on the next generation ammonia-fuelled tanker, but existing environmental, social and governance (ESG) concerns prevail for shipping operators and will cap a PE rerating.
“The dividend payout of 33sen and yield of 4.6 per cent are decent and sustainable. We maintain our Hold rating,” it added.
Source: New Straits Times