RHB Research has maintained a “Buy’ recommendation for MISC with a target price of RM7.79 from RM7.84, 11% upside and 5% yield.
It said that the petroleum segment is expected to improve in 2022F, premised on economic recovery, higher lightering activities, and a gradual increase in global oil production.
It said that while its recurring income remains solid, anchored by new asset additions, MISC sees new contract opportunities in the offshore and LNG segments.
The research house said that the overall petroleum tanker market trended higher QoQ in 4Q21 but was still below pre-pandemic levels. Rates could slowly improve due to the anticipated economic recovery and gradual increase of OPEC+ oil production.
It said that demolition activities reached the highest level since 2019, while the newbuild order book continued to stay low due to limited shipyard slots amidst prevailing tonnage oversupply. “Margins for the petroleum segment could improve with higher lightering activities.
“Its term to-spot ratio within the petroleum division increased slightly to 71:29 from 68:32 in 3Q21. There was one Dynamic Positioning (DP2) Shuttle Tanker, Eagle Campos, delivered in Jan 2022, with another four dynamic positioning shuttle tankers to be delivered in 1H22,” RHB said.
It is said that most of these vessels have long-term contracts, which should gradually strengthen MISC’s recurring cash flow. “Current bid book is c.USD2-3bn, of which the company sees better opportunity in securing new LNG and offshore contracts. Mero 3 is at >30% completion and is on track for final acceptance by by 1H24
