• Overview. MISC 4Q21 PATAMI declined 17% yoy to RM461m due to higher cost provision made in offshore (FPSO Mero 3) and heavy engineering (Kasawari CPP) segments. On qoq basis, PATAMI grew by 10% as higher JV income (due to contract extension of FPSO Kikeh) had more than offset the impact of cost provision.

• Key highlights. The number of its operated Petroleum vessels declined to 59 (3Q21: 61 vessels) as it disposed 3 aframaxes (Bunga Kenanga, Bunga Kelana 7 and Bunga Kelana 8) and chartered-in Pacific Pearl aframax in the quarter. This reduced its spot vessels to 29% (3Q21: 32%) of the portfolio mix. For offshore segment, it received contract extension for FPSO Kikeh, FPSO Ruby 2 and FSO Puteri Dulang.

• Against estimates: Below. FY21 core PBT declined 12% yoy to RM1.9bn due to lower Petroleum tanker rate and cost provisions. That was below our estimate at 90% but within consensus’ at 105%.

• Dividend. A 4 th interim DPS of 12 sen was declared which is similar to 4Q20 DPS. This brings total FY21 DPS to 33 sen which implies a payout ratio of 76% (FY20: 67%).

• Outlook. Notwithstanding weaker FY21 earnings, we remain optimistic with the company’s earnings growth coming from delivery of 6 long term DPST vessels and 2 VLCC tankers in FY22. In longer term, earnings will be supported by new contribution from FPSO Mero 3 (FY24 onwards) and potentially new contract win amidst robust demand for FPSO.

• Our call. Maintain our BUY call on MISC with unchanged SOPderived TP of RM8.10 (see Table 3). We favour MISC due to (i) proxy for growth in frontier oil and gas development projects through FPSO projects, (ii) recurring income from its asset-leasing business model and (iii) above-market dividend yield of c.5%.

Source: BIMB Securities Research - 18 Feb 2022