MISC Bhd
(Dec 14, RM5.47)
Maintain buy with fair value RM7.23: MISC could put the worst behind when it completes its exit from the container business by June 2012. While the group’s loss-making petroleum tanker and chemical shipping segments are still a drag on earnings amid a tanker oversupply, their losses next year may somewhat be cushioned by robust earnings from other divisions, notably LNG and offshore.
MISC’s exit from the container liner segment will boost next year’s profit and help contain its losses before tax to US$64.2 million (RM204.8 million) on revenue of US$135.5 million as the group makes a clean break from this segment by end-June 2012. This will be sharply lower than the estimated loss before tax of US$191.6 million this year (excluding provisions).
MISC plans to sell all 16 container vessels and other container-related assets in the next six months, which may fetch a total of US$340 million if successful.
At worst, the value of its container vessels may drop by 13% to 25% year-on-year (y-o-y) due to the glut. If these are auctioned, the proceeds could go as low as US$250 million.
If completely sold off, the amounts will be written back from the US$400 million provided this year for MISC’s departure from the container liner business.
As tanker rates are expected to continue to be depressed, we are forecasting for MISC to remain mired in losses throughout FY12 to the tune of an estimated loss before tax of
US$190 million compared with the projected US$154 million for 9MFY11.
Annualising this estimate to strip off the nine-month effect will give rise to a 13% drop as we see rates start to tick up in 2H12 as the global economy starts to pick up.
Come 2013, MISC’s profit from the petroleum tanker segment should hover at US$25 million. We still think the glut in tanker supply will persist into 2013, although by then rates are bound to be better relative to currently as the imbalance between supply and demand eases.
Earnings from chemical tankers will break even next year as demand outstrips supply.
MISC is trading at an eight-year low, with a forward price-to-book value (P/BV) lower than -2 standard deviations, which we think is the bottom of the stock’s trading range as its book value next year will not get any lower. Its stable LNG and offshore segment as well as growing contribution from its tank terminal JVs and anticipated strong order book from Malaysia Marine and Heavy Engineering Bhd at over RM3 billion are expected to collectively generate a profit before tax of US$718.9 million.
This will help contain the US$274 million loss from the container and petroleum side next year. We reaffirm our contrarian “buy” call on MISC with our fair value of RM7.23 unchanged, premised on 1.5 times FY12 book value per share. — OSK Research, Dec 14
(Dec 14, RM5.47)
Maintain buy with fair value RM7.23: MISC could put the worst behind when it completes its exit from the container business by June 2012. While the group’s loss-making petroleum tanker and chemical shipping segments are still a drag on earnings amid a tanker oversupply, their losses next year may somewhat be cushioned by robust earnings from other divisions, notably LNG and offshore.
MISC’s exit from the container liner segment will boost next year’s profit and help contain its losses before tax to US$64.2 million (RM204.8 million) on revenue of US$135.5 million as the group makes a clean break from this segment by end-June 2012. This will be sharply lower than the estimated loss before tax of US$191.6 million this year (excluding provisions).
MISC plans to sell all 16 container vessels and other container-related assets in the next six months, which may fetch a total of US$340 million if successful.
At worst, the value of its container vessels may drop by 13% to 25% year-on-year (y-o-y) due to the glut. If these are auctioned, the proceeds could go as low as US$250 million.
If completely sold off, the amounts will be written back from the US$400 million provided this year for MISC’s departure from the container liner business.
As tanker rates are expected to continue to be depressed, we are forecasting for MISC to remain mired in losses throughout FY12 to the tune of an estimated loss before tax of
US$190 million compared with the projected US$154 million for 9MFY11.
Annualising this estimate to strip off the nine-month effect will give rise to a 13% drop as we see rates start to tick up in 2H12 as the global economy starts to pick up.
Come 2013, MISC’s profit from the petroleum tanker segment should hover at US$25 million. We still think the glut in tanker supply will persist into 2013, although by then rates are bound to be better relative to currently as the imbalance between supply and demand eases.
Earnings from chemical tankers will break even next year as demand outstrips supply.
MISC is trading at an eight-year low, with a forward price-to-book value (P/BV) lower than -2 standard deviations, which we think is the bottom of the stock’s trading range as its book value next year will not get any lower. Its stable LNG and offshore segment as well as growing contribution from its tank terminal JVs and anticipated strong order book from Malaysia Marine and Heavy Engineering Bhd at over RM3 billion are expected to collectively generate a profit before tax of US$718.9 million.
This will help contain the US$274 million loss from the container and petroleum side next year. We reaffirm our contrarian “buy” call on MISC with our fair value of RM7.23 unchanged, premised on 1.5 times FY12 book value per share. — OSK Research, Dec 14
