RHB Research said MISC’s earnings profile is expected to remain stable.
PETALING JAYA: MISC Bhd
is more optimistic on the progress of the Mero-3 floating production, storage and offloading (FPSO) vessel that is being built for the Petrobras-operated ultra-deepwater Mero field offshore Brazil.
CGS-CIMB Research said MISC’s guidance for the delivery of the Mero-3 FPSO in May 2024 remains unchanged, which is six months later than the original delivery timeline due to Covid-19-related delays in China and supply-chain issues.
“Discussions between MISC and charterer Petrobras on cost recovery and waiver of liquidated damages are continuing.
“The good news is that MISC is sounding more confident of the project timeline after pandemic lockdowns were lifted in China in January 2023,” the research firm said in a report.
It believes that MISC will no longer consider relocating the project to Dubai, but will probably continue with the full integration works at CIMC Raffles, Yantai, China. Based on updates from MISC, it said the FPSO project was 85% complete at end-March 2023.
Meanwhile, RHB Research said that MISC’s earnings profile is expected to remain stable with term-to-spot ratio within the petroleum division increasing to 84:16 in the first quarter of 23 (1Q23) from 77:23 in 4Q22, as more Aframax vessels were put on term charters.
RHB Research said MISC’s net profit at RM612.9mil in the first quarter of financial year 2023 (versus RM376.4mil in the same period a year ago) came in with no surprises.
This was thanks to stronger tanker rates and better offshore division in the absence of Mero 3’s cost provisions.
“We continue to like the company for its steady operating cash flow with the anticipation of a bump-up from Mero 3 starting mid-2024 and its undemanding valuation of 14 times financial year 2024 forecast price-to-earnings,” it added.
On outlook, MIDF Research noted that upstream players had increased their capital expenditure spending under the notion of stable-yet-elevated oil prices and improved oil demand is expected in 2023.
“Subsequently, we believe the FPSO market will continue to grow in tandem with the higher demand for exploration and production operations in South America and West Africa,” added MIDF Research.
As of 1Q23, MISC had 37 FPSOs on order, of which 16 orders were from Brazil.
