Investment Highlights

• We maintain our HOLD call on MISC with an unchanged fair value of RM7.79/share based on a ESG-adjusted sum-ofparts (SOP) valuation. Our fair value incorporates a 4-star ESG rating which accords a 3% premium to our fair value.

• TotalEnergies announced a farm-in deal for its Block 20 development in Angola which contains the Cameia-Golfinho oilfields, via a 40% sale to Petronas for a purchase consideration of US$400mil.

• The Cameia-Golfinho oilfields is the first deep-water project in the Kwanza Basin and are located 150km southwest of Luanda in water depths of 1,700 metres, The development is planned to involve an engineering, procurement and construction (EPC) contract for a FPSO with an oil production capacity of 70,000 bpd.

• Upstream had reported that following a successful appraisal well, 3 groups were selected to participate in a pre-front-end engineering and design (FEED) contest for Block 20/11 (and Block 21/09) in 2021 covering a 100,000 boepd FPSO which were: Bumi Armada, Technip-Yinson and Saipem-MISC.

• Though Bumi Armada was said to have led the pack, Upstream reports that concerns over rising supply-chain challenges and financing costs have created difficulties towards contract finalisation. TotalEnergies CEO Patrick Pouyanne was said to be determined to only sanction developments that are “resilient” to oil prices under US$20 per barrel, breakeven costs of less than US$30 per barrel and emissions of which are below 19kg per barrel.

• Upstream cites that industry sources have suggested that other contractors are now poised for the contract, namely Saipem with possible partners including MISC. Additionally, rather than a charter contract, the vessel will be owned outright by TotalEnergies.

• Given Petronas’s equity stake of 51% stake in MISC, we believe the group would be in a strong position for the EPC contract coupled with its strong balance sheet with an estimated net gearing of 0.26x as at 2QFY23. We expect the final investment decision to be made by the end-of the year and for commissioning to happen in 2026.

• Assuming the Saipem-MISC pact secures the EPC FPSO at a contract value of US$1.2bil (similar to the capex for Yinson’s Anna Nery), we estimate that this could add 6% to FY24F core net profit.

• MISC currently trades at a FY23F PE of 15x vs. its 5-year average of 17.7x.

Source: AmInvest Research - 29 Sept 2023