• Overview. MISC 4Q20 core profit grew by 21% yoy and 67% qoq to RM479m due to stronger offshore segment and higher income from JV. Revenue grew by 11% yoy and 29% qoq to RM2.6bn underpinned by new revenue contribution from FPSO Mero 3 project and construction progress of Kasawari CPP project. The Petroleum segment however suffered from softer tanker rate (refer Chart 1-3) amidst lack oil supply due to OPEC+ supply curb measure. The JV line was boosted by one-off gain from FPSO Espirito Santo whose lease and O&M contracts were extended for another 5 years by Shell Brazil.

• Key highlights. In Petroleum segment, MISC took delivery of Eagle Passos DPST vessel while disposed 1 VLCC (Bunga Kasturi 3) and 2 Aframaxes (Eagle Tacoma & Eagle Trenton). This reduced the number of its operated vessels to 68 (3Q20: 70) with portfolio mix between term to spot maintained at 65:35. In Offshore segment, it sent FSO Angsi to yard for scrap.

• Against estimates: Below. Full year FY20 profit rose by 31% yoy to RM2.2bn mainly due to jump in income from JV line. This is below our estimate at 92% but exceed consensus’ estimate at 107%. The deviation against our forecast stemmed from weaker than expected income from Petroleum segment.

• Dividend. A 4th interim DPS of 12 sen was declared which is similar to 4Q19 DPS. This brings YTD DPS to 33 sen (9M19: 33 sen).

• Our call. Reiterate our BUY call on MISC with unchanged SOP derived TP of RM8.40. Our TP include FPSO Mero 3 project worth c.RM0.65/share, according to our estimate. We favour MISC due to (i) proxy for growth in frontier oil and gas development projects, (ii) recurring income from its asset-leasing business model and (iii) above-market dividend yield of 5.1%.

Source: BIMB Securities Research - 19 Feb 2021