MIDF Research is not making any changes to its forecasts for MISC.
PETALING JAYA: The latest developments in MISC Bhd
’s operations, involving the construction of liquefied natural gas (LNG) carriers and new time charters, have set the tone for the shipping company to further elevate its business and rejuvenate its LNG fleet with modern, efficient vessels.
MIDF Research said these developments align with MISC’s goals of achieving greenhouse gas (GHG) emission and intensity reduction by 2030, in accordance with its internal sustainability strategies, as well as external policies and regulations by the International Maritime Organisation 2020 Sulphur Cap and GHG Reduction Strategy.
MISC had announced a few developments in its operations, including shipbuilding contracts signed with Samsung Heavy Industries Co Ltd for the construction of two newbuild LNG carriers.
The new carriers will enter time charters with PETRONAS LNG Ltd for 15 years upon their delivery in 2027.
A letter of intent (LOI) was also signed with PETRONAS LNG Sdn Bhd (PLSB) for the provision of long-term LNG shipping services to PLSB and its subsidiaries, which involves the time charter of the new LNG carriers.
MISC also agreed to the early termination of the existing time charters for three steam LNG carriers – Seri Ayu, Seri Angkasa and Seri Begawan – with the last charter ending in 2028.
The shipping company will receive monetary compensation from PLSB for the early termination of these contracts.
Additionally, MISC has secured time charters for two LNG carriers – Seri Alam and Seri Amanah – set to commence upon the expiry of their current charters in 2025 and 2026.
“With the growing demand expected for LNG in the Asian region, we opine that these transactions are timely and apt.
“The demand for LNG, notably in East and South-East Asia, is expected to rise in tandem with the increased discovery of gas fields within the region.”
All in all, MIDF Research remains positive on these transactions.
“Despite the optimistic outlook for LNG demand, we noted that there are risk factors to consider, including gas market volatility affecting LNG prices, environmental challenges in terms of methane emissions from LNG combustion, and capital-intensive development and maintenance for LNG infrastructure.
“The transactions may also be affected by commercial, project execution and operational risks.
“However, given MISC’s expertise in the maritime industry, we believe the group would implement appropriate action plans to mitigate these challenges,” MIDF added.
The research house is not making any changes to its forecasts for MISC at this juncture, as the shipbuilding project will only be completed in 2027.
The brokerage maintains its “buy” call on the stock, with a target price of RM9.75.
Meanwhile, Kenanga Research has kept its “market perform” on MISC, with a target price of RM8.11.
The research house likes the shipping company for its exposure to the booming global petroleum tanker market.
It cites high demand for long voyages due to the Red Sea conflict, a large recurring earnings base which provides the ability to pay consistent dividends (3.8% for financial year 2025) and a huge balance sheet which enables the group to bid for more capital-intensive floating production, storage and offloading jobs.
Risks to its call include lower-than-expected utilisation and spot rates for the petroleum fleet, potential additional cost overruns and project delays for Mero-3, further weakness in the global LNG shipping market, and the possibility of non-approval of the deal.
