Stock Name: MISC
Company Name: MISC BHD
Research House: MAYBANK
MISC Bhd
(Aug 23, RM8.80)
Maintain buy at RM8.86 with revised target price of RM10.05 (from RM9.05): Last Friday's analyst briefing reaffirmed our conviction about MISC's improving short-mid-long term prospects. We make no change to our earnings forecasts, but we raise our target price to the full value of our sum-of-parts valuation (previously 10% discount) as earnings visibility improves in the container business, and prospects brighten in virtually all other segments. We maintain our 'buy' call.
Container losses will halve in FY2011, per guidance. This equates to a pre-tax loss of RM570 million. The global shortage of container boxes owing to manufacturers' 'slow steaming' delivery is expected to persist into 2011.
This has helped to cap tonnage increase and provide support to rates, which are now re-negotiated at two-month intervals. Global container traffic is set to improve by 8.5% in 2010 and 7.3% in 2011.
Expanding petroleum business. MISC expects the division's performance in FY2011 to equal FY2010's (RM116 million pre-tax profit).
Nevertheless, fleet expansion for long-term growth includes five newbuilds in 2QFY2011 and expansion into the Suezmax space, a market new to MISC. It believes newbuilds now cost less than existing second hand vessels. Newbuilds also allow MISC to control its delivery period.
Two LNG vessels earmarked for conversions. This division will continue to anchor MISC's earnings.
It registered a pretax profit of RM384 million in 1QFY2011, accounting for 81% of group earnings. Management has confirmed that two LNG vessels, currently laid up, to be converted for offshore operations (these are FSRU and FLNG vessels).
Positive for heavy engineering. Technip Soci''t'' Anonyme (TEC FP; not rated) of France has confirmed it is taking up a strategic 8% to 10% stake in MMHE in its upcoming IPO in 4Q.
Technip is a world leader in project management, engineering and construction, with an extensive portfolio of innovative solutions and technologies.
Technip offers MMHE technical expertise and technological advantage. Technip already has a track record constructing FLNG vessels for Shell.
Offshore business brightens. Two LNG conversion projects, estimated to cost US$3 billion (RM9.4 billion), could lift MMHE's order book beyond RM5 billion and contribute to heavy engineering profits from FY2012. MISC may co-own these vessels, backed by long-term charters. If so, from FY2014, they will provide steady earnings to the offshore division. We gather that several offshore units (MOPU,FSO, FPSO) will be built over the next few years. ' Maybank IB Research, Aug 23
This article appeared in The Edge Financial Daily, August 24 2010.
Company Name: MISC BHD
Research House: MAYBANK
MISC Bhd
(Aug 23, RM8.80)
Maintain buy at RM8.86 with revised target price of RM10.05 (from RM9.05): Last Friday's analyst briefing reaffirmed our conviction about MISC's improving short-mid-long term prospects. We make no change to our earnings forecasts, but we raise our target price to the full value of our sum-of-parts valuation (previously 10% discount) as earnings visibility improves in the container business, and prospects brighten in virtually all other segments. We maintain our 'buy' call.
Container losses will halve in FY2011, per guidance. This equates to a pre-tax loss of RM570 million. The global shortage of container boxes owing to manufacturers' 'slow steaming' delivery is expected to persist into 2011.
This has helped to cap tonnage increase and provide support to rates, which are now re-negotiated at two-month intervals. Global container traffic is set to improve by 8.5% in 2010 and 7.3% in 2011.
Expanding petroleum business. MISC expects the division's performance in FY2011 to equal FY2010's (RM116 million pre-tax profit).
Nevertheless, fleet expansion for long-term growth includes five newbuilds in 2QFY2011 and expansion into the Suezmax space, a market new to MISC. It believes newbuilds now cost less than existing second hand vessels. Newbuilds also allow MISC to control its delivery period.
Two LNG vessels earmarked for conversions. This division will continue to anchor MISC's earnings.
It registered a pretax profit of RM384 million in 1QFY2011, accounting for 81% of group earnings. Management has confirmed that two LNG vessels, currently laid up, to be converted for offshore operations (these are FSRU and FLNG vessels).
Positive for heavy engineering. Technip Soci''t'' Anonyme (TEC FP; not rated) of France has confirmed it is taking up a strategic 8% to 10% stake in MMHE in its upcoming IPO in 4Q.
Technip is a world leader in project management, engineering and construction, with an extensive portfolio of innovative solutions and technologies.
Technip offers MMHE technical expertise and technological advantage. Technip already has a track record constructing FLNG vessels for Shell.
Offshore business brightens. Two LNG conversion projects, estimated to cost US$3 billion (RM9.4 billion), could lift MMHE's order book beyond RM5 billion and contribute to heavy engineering profits from FY2012. MISC may co-own these vessels, backed by long-term charters. If so, from FY2014, they will provide steady earnings to the offshore division. We gather that several offshore units (MOPU,FSO, FPSO) will be built over the next few years. ' Maybank IB Research, Aug 23
This article appeared in The Edge Financial Daily, August 24 2010.
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