Stock Name: MISC
Company Name: MISC BHD
Research House: OSK
MISC Bhd
(May 12, RM7.22)
Maintain neutral at RM7.31 with reduced fair value of RM7.44 (from RM8.20): MISC reported FY11 core earnings of RM910 million (year-on-year: 21%, quarter-on-quarter: 216%) on the back of revenue of RM12.3 billion (y-o-y: -10.5%, q-o-q: -4%). Its bottom-line was 27% below our forecast but in line with consensus.
For the full year the shipping conglomerate recorded a total net exceptional gain of RM922 million. A big chunk of this was the gain on the disposal of its 33.5% stake in Malaysia Marine And Heavy Engineering Holdings Bhd (RM1.4 billion) after netting sizeable impairment losses totalling RM576.6 million. The market value of its vessels has significantly depreciated in value given the oversupply of vessels along with other provisions related to its loans and investments. MISC announced a final dividend of 10 sen per share with full year dividend coming in at 25 sen, which represents a payout ratio of over 100% of its core earnings.
MISC's revenue was relatively weaker, attributed to the lower contribution from the engineering division coupled with lower shipping rates seen on its tanker and liner division amid three catastrophic black swan events globally. Shipping rates continue to be depressed due to the oversupply of vessels, which is likely to persist over the immediate to medium term, in line with our bearish view on the overall shipping industry. Ailing rates coupled with higher bunker fuel costs continue to keep MISC's liner, petroleum and chemical divisions in loss-making territory over the past few quarters. Nonetheless, MISC's offshore, LNG and fabrication businesses remain in the black and will continue to cushion earnings.
MISC's deteriorating outlook and fundamentals enforce a further downgrade to our forecasts, which we slash by 34% on the back of a 13.6% cut in revenue premised on lower petroleum and chemical tanker rates which we have now trimmed by 4.2% to 6.3% over the next two years. We have also adjusted our forecasts to reflect the new financial year estimates in line with the entire Petroliam Nasional Bhd group.
Following the downgrade, we retain our 'hold' recommendation at a lower fair value of RM7.44 (from RM8.20) pegged at 1.5 times FY11 ending December book value of equity per share. ' OSK Research, May 12
This article appeared in The Edge Financial Daily, May 13, 2011.
Company Name: MISC BHD
Research House: OSK
MISC Bhd
(May 12, RM7.22)
Maintain neutral at RM7.31 with reduced fair value of RM7.44 (from RM8.20): MISC reported FY11 core earnings of RM910 million (year-on-year: 21%, quarter-on-quarter: 216%) on the back of revenue of RM12.3 billion (y-o-y: -10.5%, q-o-q: -4%). Its bottom-line was 27% below our forecast but in line with consensus.
For the full year the shipping conglomerate recorded a total net exceptional gain of RM922 million. A big chunk of this was the gain on the disposal of its 33.5% stake in Malaysia Marine And Heavy Engineering Holdings Bhd (RM1.4 billion) after netting sizeable impairment losses totalling RM576.6 million. The market value of its vessels has significantly depreciated in value given the oversupply of vessels along with other provisions related to its loans and investments. MISC announced a final dividend of 10 sen per share with full year dividend coming in at 25 sen, which represents a payout ratio of over 100% of its core earnings.
MISC's revenue was relatively weaker, attributed to the lower contribution from the engineering division coupled with lower shipping rates seen on its tanker and liner division amid three catastrophic black swan events globally. Shipping rates continue to be depressed due to the oversupply of vessels, which is likely to persist over the immediate to medium term, in line with our bearish view on the overall shipping industry. Ailing rates coupled with higher bunker fuel costs continue to keep MISC's liner, petroleum and chemical divisions in loss-making territory over the past few quarters. Nonetheless, MISC's offshore, LNG and fabrication businesses remain in the black and will continue to cushion earnings.
MISC's deteriorating outlook and fundamentals enforce a further downgrade to our forecasts, which we slash by 34% on the back of a 13.6% cut in revenue premised on lower petroleum and chemical tanker rates which we have now trimmed by 4.2% to 6.3% over the next two years. We have also adjusted our forecasts to reflect the new financial year estimates in line with the entire Petroliam Nasional Bhd group.
Following the downgrade, we retain our 'hold' recommendation at a lower fair value of RM7.44 (from RM8.20) pegged at 1.5 times FY11 ending December book value of equity per share. ' OSK Research, May 12
This article appeared in The Edge Financial Daily, May 13, 2011.
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