• MISC is among the early mover in sustainability initiative – a journey it  has embarked since 2012. Fast forward a decade, the company and its  partners in The Castor Initiatives are now set to transform the energyrelated maritime transport industry – which currently runs entirely on  fossil fuel – to utilize zero-carbon ammonia as bunker fuel.

• The company plans to achieve a net zero GHG emission by 2050. It  therefore plans to deploy a zero-emission vessel (ZEV) latest by 2030 and  will spend an enormous sum of money to fully transition its existing fleet  to ZEV by 2050. It did not disclose the allocation for ESG initiatives  however.

• We have assigned MISC an overall ESG rating 4.56 out of 5 which falls in  the rating band of “Excellent”.

• Maintain our BUY call on MISC with unchanged TP of RM8.00 which  implies 15x FY23 PER.

Summary

Global maritime transport plays a key role in facilitating global trade and fostering economic development. The sector contributes to global climate change however as it is almost entirely dependent on fossil fuels. World Bank estimates Global Maritime transport contributes around 3% of global GHG  emission. In order to reduce this, MISC takes a driver seat among global shipping companies in deploying environmental-friendly technologies on its vessels. This includes investment in LNG dual-fuel vessels as well as in next-generation vessel that can run on ammonia which acts as a zero-carbon bunker fuel. The company is ready to set aside a large amount of capex for its fleet renewal program in line with its mission to achieve a net zero GHG  emission by 2050.

MISC’s ESG Evolution Journey

MISC is one of the world’s largest energy-related maritime solution and services providers. It embarked on sustainability journey since early 2010s  i.e., via the introduction of its Sustainability Reporting Framework in 2012.  In 2017, the company set an initial 5-year carbon emission reduction target from 2016 baseline. To achieve this, the company began its fleet renewal program in 2018 which adopts environmental-friendly technologies. It became one of the first international tanker companies that have invested  in LNG dual-fuel vessel – with the first one delivered in 2019. As of end 2022, the company owns 11 dual-fuel vessels in its fleet (4 aframaxes, 2 dynamic positioning shuttle tankers (DPST) and 5 VLCCs). Subsequently, the company refreshes its target to achieving a net zero GHG emission by 2050. This will require the company to completely transition its existing fleet to vessels that emit zero carbon.

Source: BIMB Securities Research - 11 May 2023