MBSB Investment Bank Bhd (MBSB Research) maintained its BUY call on MISC Bhd with an unchanged target price of RM9.22 after the group secured a second long-term Time Charter Party (TCP) contract with Northern Lights JV DA (NLJV) for a newbuild liquefied carbon dioxide (LCO2) carrier, describing the deal as a strategic step into the growing carbon capture and storage (CCS) industry.
The contract involves a 12,000 cubic metre LCO2 carrier and carries a firm charter period of 10 years. The vessel is expected to be jointly owned by MISC and NLJV, one of Europe’s leading CCS infrastructure developers backed by energy majors Shell, Equinor and TotalEnergies.
According to MBSB Research, the agreement reinforces MISC’s efforts to diversify beyond its traditional role as a fossil fuel transporter and position itself as a key enabler of the green energy transition. The research house said early participation in the LCO2 transportation market could allow MISC to build expertise and infrastructure ahead of competitors as the global carbon management value chain expands.
While acknowledging operational and regulatory risks associated with carbon transportation, including dependence on carbon capture facilities, storage infrastructure and carbon pricing mechanisms in Europe, MBSB Research said the risks are largely mitigated by NLJV’s strong shareholder backing and low counterparty risk.
The research house estimates a vessel of this size could generate annual revenue of between RM35 million and RM50 million once operational. However, it expects the earnings contribution to remain modest at less than 1.5% of group earnings, given MISC’s sizeable RM12.3 billion order book.
As capital expenditure will be spread over the next two to three years during construction, MBSB Research made no changes to its earnings forecasts and maintained its positive outlook on the stock.
The price for the stock gained slightly to RM8.22, as of 10.03 am.
