MISC’s RM2.3 Billion Sustainability Bet

Recently, MISC obtained an 11-year term loan to finance 6 very large ethane carriers (VLECs) from Standard Chartered. The financing of the VLECs is in line with the group’s commitment to cleaner transport solutions and achieving net-zero greenhouse gas emissions by 2050. MIDF has opined that the move is a positive prospect.

The gist is MISC Bhd has entered into a USD527m (approx. RM2.3b) syndicated loan facility to finance 6 very large ethane carriers (VLECs). The term loan is a 11-year sustainable-linked non-recourse term loan is the group’s debut sustainability-linked loan (SLL) and is structured to align with its long-term business strategy and sustainability aspirations. Its Singapore-based subsidiaries – Seri Everest, Seri Erlang, Seri Emei, Seri Emory, Seri Elbert, and Seri Emperor – inked the syndicated loan facility with Standard Chartered. Meanwhile, Korea Development Bank, Sumitomo Mitsui Banking Corporation, Labuan Branch, DBS Bank Ltd, ExportImport Bank of Malaysia Bhd, MUFG Bank Ltd, Singapore Branch, as well as an undisclosed lender acted as mandated lead arrangers.

This term loan is in line with MISC’s commitment in achieving net-zero greenhouse gas emissions by 2050 and as well as its contribution to a carbon-neutral economy by transitioning to low-carbon, and eventually zero-carbon, emissions transport solutions. The VLECs are expected to meet the ESG key performance indicators (KPIs) set by the International Maritime Organisation (IMO) and the Poseidon Principles. The carriers will also be used to measure the carbon intensity of the group’s Gas Assets & Solutions fleet.

Accordingly, VLECs are used to mainly transport ethane and liquid petroleum gas (LPG). VLECs are considered one of the most sustainable sea transport vehicles, as they are often reused in cargo for fuel; eradicating the need for the burning of high-carbon diesel. We opine that securing this SLL for the VLECs is on par with MISC’s drive to improve its ESG performance and decarbonisation strategies.

In consideration that this term loan is still in the early stages, we make no changes to our earnings estimates. Overall, MIDF continues to like MISC as it medium to long-term growth plans stay intact, in line with the increasing interest in clean and sustainable carriers and the demand growth for petroleum products. The house maintains it BUY call on MISC, with an unchanged target price of RM8.16. The target price is pegged on a PER of 16x to a revised EPS23 of 51sen

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