• Maintain BUY (TP: RM10.10). MISC FY23 core PATAMI of RM2.5bn (+6.1% yoy) was inline with both our and consensus’ estimate at 104%. Earnings recovered swiftly at RM627mn in 4Q23 from cost provision in previous quarters particularly in Offshore and MMHE segment. A 4th interim DPS of 12 sen was declared which is similar to 4Q23 DPS. This brings YTD DPS of 36sen (FY22: 33sen). We expect MISC to post better earnings in FY24 driven by (i) stronger result in MMHE, (ii) new income contribution from FPSO Mero 3, and (iii) elevated petroleum tanker rate. We maintain our BUY call on MISC with unchanged SOP-derived TP of RM10.10.

• Key Highlights. 4Q23 PATAMI grew 45% QoQ to RM627mn mainly underpinned by turnaround at MMHE as well as stronger earnings at Petroleum segments. The construction of FPSO ero 3 has reached overall physical completion of 93.5% as of 4Q23 and it has sailed away on 24th Feb 2024. The vessel is currently undergoing precommissioning and commissioning phase.

• Earnings forecast. No change to our earnings forecast.

• Outlook. Rates in petroleum tanker (Chart 1) and LNG carriers remain elevated which will support MISC’s earnings in coming quarters. Newbuild orders in petroleum tanker segment remain subdued hence it is expected that the tonnage will be squeezed further in coming year. The company is also tendering for new jobs in FPSO market which remain strong in demand despite rising development costs. The company also remain steadfast to assist MMHE to deliver projects within initial cost budget and time. All in, we expect stronger earnings outlook in FY24 amidst upcycle in Oil and Gas development.

Source: BIMB Securities Research - 28 Feb 2024