AmInvest Research Reports

MISC - Growing LNG carrier fleet size

AmInvest
Publish date: Thu, 11 Aug 2022, 09:42 AM
AmInvest
0 6,534
An official blog in I3investor to publish research reports provided by AmInvest research team.

All materials published here are prepared by AmInvest. For latest offers on AmInvest trading products and news, please refer to: https://www.aminvest.com/eng/Pages/home.aspx

Tel: +603 2036 1800 / +603 2032 2888
Fax: +603 2031 5210
Email: enquiries@aminvest.com

Office Hours
Monday to Thursday: 8:45am – 5:45pm
Friday: 8:45am – 5:00pm
(GMT +08:00 Malaysia)

Investment Highlights

  • We maintain HOLD on MISC with an unchanged sum-of-parts (SOP) based fair value of RM8.21/share, which also reflects a premium of 3% for our unchanged 4-star ESG rating. This implies an FY22F EV/EBITDA of 10x, 1 standard deviation above its 3-year average of 9x.
  • MISC, through a 4-party consortium with Nippon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha and China LNG Shipping (Holdings), has been awarded a long-term time charter parties contract by QatarEnergy to provide 7 units of 174,000 m3 newbuild liquefied natural gas carriers (LNGCs).
  • These LNGCs will be built by Hyundai Heavy Industries and are expected to commence operations under long-term charters starting from 2025.
  • While all four consortium members including MISC will each effectively own a 25% stake in the awarded LNGCs, we note that joint venture companies will be formed to manage operations of these vessels.
  • Assuming a conservative IRR of 10%, LNGC newbuild price of US$200mil per vessel, 50:50 debt-to-equity ratio and 15- year charter firm period, we estimate the long-term time charter award could slightly increase MISC’s FY25F core net profit by 3% given the group’s huge asset base while raising its FY24F net gearing ratio of 12% currently to a still comfortable 16%.
  • Overall, we are positive on this charter award as it will further expand MISC’s gas assets and solutions segment, which accounted for 76% of 1QFY22 group total operating profit. The group currently owns and runs 30 LNG vessels as of end- 1QFY22 while expecting the delivery of 2 newbuild units by 1H2023.
  • Within its LNG shipping operations, time charter contracts for 2 vessels are expected to expire in 4QFY22. However, management previously hinted at potential contract extensions with Petronas. Subsequently, contracts for another 2 vessels are also scheduled for expiry in 2023.
  • Recall that LNG spot rates were trending downward in 1QFY22 as Asian-bound cargoes were diverted to Europe due to the Russia-Ukraine conflict coupled with weaker LNG demand from China induced by stringent lockdowns. Since then, the average spot rates have doubled from US$39K/day in March 2022 to US$81K/day in June 2022 (Exhibit 2).
  • We expect the company’s 1HFY22 results, which will be announced on 18 August 2022, to be in line with expectations. MISC currently trades at a compelling FY23F EV/EBITDA of 8x, 11% below its 3-year average of 9x.

 

Source: AmInvest Research - 11 Aug 2022

Related Stocks
Discussions
Be the first to like this. Showing 0 of 0 comments

Post a Comment