MISC Bhd, an energy-relater maritime solutions and services provider, has unexpectedly trimmed its quarterly DPS to 7 sen in 3Q23, back to historical levels, and down from a more generous 10 sen in 2Q23.
CGS-CIMB, in its Company Note today (Nov 23), it said that the group’s 9M23 core net profit of USD348 million, came to 74% of its previous full-year forecast, which is slightly above expectations since it expects a stronger 4Q23F.
“We cut our DPS estimate for FY23F to 36 sen, from 40 sen, and for FY24-25F to 33 sen from 40 sen,” it said.
The research house reiterate its HOLD call, with a higher SOP-based TP of RM7.64 as the group roll forward to end-CY24F, but also incorporate higher assumed debt costs for the Mero-3.
“3Q23 core net profit of US$113m was 9% higher QoQ, mainly due to narrower provisions for foreseeable project losses at MMHE compared to the elevated provisions in 2Q23.
“Stripping out MMHE, MISC’s 3Q23 core PBT would have been 14% lower QoQ, as the sequential decline in spot crude tanker freight rates caused a 13% QoQ drop in AET’s core PBT.
“Meanwhile, the 3Q23 offshore core PBT declined 81% QoQ as the FPSO Mero-3 construction profit recognition slowed down in step with the higher percentage of completion,” it said.
It said that on year-on-year basis, the 3Q23 core net profit was 36% lower, because the MMHE pretax loss in 3Q23 contrasted to core pretax profits in 3Q22, while AET had received a one-off compensation in 3Q22.
“We expect MISC to perform better in 4Q23F, on account of the surge in crude tanker shipping freight rates in Oct to Nov.
“Shipbroker Clarksons and shipping consultancy Poten attribute this to longer-haul shipments of crude oil from the Americas to Asia, pick-up in Chinese demand for crude this year, due to the recovery in jet fuel demand and low single-digit percentage shipping fleet growth.
“We expect the strong AET performance to continue into FY24-25F. Conversely, LNG earnings may moderate next year as more legacy charters expire, and offshore earnings could also fall in FY24F,” it said.
CGS-CIMB added upside risk include higher-than-expected tanker freight rates while downside risk is unexpected delays to Mero-3.
