Stock Name: MISC
Company Name: MISC BHD
MISC Bhd
(July 11, RM7.79)
Upgrade to outperform at RM7.70 with revised fair value of RM8.47 (from RM7.26): We are upgrading our indicative fair value for MISC by 17% from RM7.26 to RM8.47, having raised our valuations for MISC's offshore assets comprising 10 floating production storage offloading (FPSO)/floating storage offloading (FSO) units and two mobile offshore production units (MOPUs) from 1.2 times book value to two times.
The upgrade in our valuations of MISC's offshore assets is inspired by the reportedly RM3.03 strike price arrived at for Bumi Armada Bhd shares by way of book-building pursuant to its IPO (The Star and Business Times dated July 9, 2011). Based on Bumi Armada's estimated post-IPO proforma book value of RM1.09 per share (as disclosed in the integrated offshore oil and gas player's IPO prospectus on page 20), the price-to-book valuation works out to be 2.8 times.
We still hold the view that MISC's offshore assets should be valued at a discount to Bumi Armada (the former's two times book value against the latter's 2.8 times) given that Bumi Armada offers more direct exposure to the offshore oil and gas sector while the exposure to MISC's offshore assets at present is through MISC, which is also engaged in the less lucrative shipping business. However, the discount should not be too excessive (to the extent of 1.2 times book value for MISC's offshore assets we assumed previously against Bumi Armada's 2.8 times).
We maintain our forecasts but the risks include a prolonged downturn in the shipping sector and higher-than-expected bunker cost.
The performance of MISC's petroleum, chemical and container liner segments will continue to be capped by the weak freight rates and volumes over the next one to two years. However, value has emerged with an imminent re-rating of the valuations of MISC's offshore assets on the heels of Bumi Armada's IPO.
Operationally, we also expect steady income stream in its LNG division and high growth at its offshore and engineering businesses. Indicative fair value is raised by 17% from RM7.26 to RM8.47 based on sum-of-parts. We upgrade to 'outperform' from 'underperform'. ' RHB Research, July 11
This article appeared in The Edge Financial Daily, July 12, 2011.
Company Name: MISC BHD
| Research House: RHB | Price Call: BUY | Target Price: 8.47 |
MISC Bhd
(July 11, RM7.79)
Upgrade to outperform at RM7.70 with revised fair value of RM8.47 (from RM7.26): We are upgrading our indicative fair value for MISC by 17% from RM7.26 to RM8.47, having raised our valuations for MISC's offshore assets comprising 10 floating production storage offloading (FPSO)/floating storage offloading (FSO) units and two mobile offshore production units (MOPUs) from 1.2 times book value to two times.
The upgrade in our valuations of MISC's offshore assets is inspired by the reportedly RM3.03 strike price arrived at for Bumi Armada Bhd shares by way of book-building pursuant to its IPO (The Star and Business Times dated July 9, 2011). Based on Bumi Armada's estimated post-IPO proforma book value of RM1.09 per share (as disclosed in the integrated offshore oil and gas player's IPO prospectus on page 20), the price-to-book valuation works out to be 2.8 times.
We still hold the view that MISC's offshore assets should be valued at a discount to Bumi Armada (the former's two times book value against the latter's 2.8 times) given that Bumi Armada offers more direct exposure to the offshore oil and gas sector while the exposure to MISC's offshore assets at present is through MISC, which is also engaged in the less lucrative shipping business. However, the discount should not be too excessive (to the extent of 1.2 times book value for MISC's offshore assets we assumed previously against Bumi Armada's 2.8 times).
We maintain our forecasts but the risks include a prolonged downturn in the shipping sector and higher-than-expected bunker cost.
The performance of MISC's petroleum, chemical and container liner segments will continue to be capped by the weak freight rates and volumes over the next one to two years. However, value has emerged with an imminent re-rating of the valuations of MISC's offshore assets on the heels of Bumi Armada's IPO.
Operationally, we also expect steady income stream in its LNG division and high growth at its offshore and engineering businesses. Indicative fair value is raised by 17% from RM7.26 to RM8.47 based on sum-of-parts. We upgrade to 'outperform' from 'underperform'. ' RHB Research, July 11
This article appeared in The Edge Financial Daily, July 12, 2011.
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