• MISC signed a contract with PETCO for the time charter of two ammonia dual-fuel Aframax oil tankers.

• We think this is a step in the right direction to make ammonia a viable fuel before the deployment of zero emission vessel targeted by 2030.

• We take this opportunity to make slight changes to our FY26F earnings forecast onwards to account for a new LNG contract that it secured with Qatar Energy recently.

• Maintain our BUY call on MISC with an unchanged SOP-derived TP of RM10.10 which implies 17x FY24F P/E.

Secured TCP for World’s First Dual Fuel Aframax Oil Tankers

MISC announced that it has entered into a time charter party (TCP) with Petronas’ PETCO Trading Labuan Company (PETCO) for the charter of two ammonia dual-fuel Aframax oil tankers. Concurrently, it has also entered into a shipbuilding contract with China’s Dalian Shipbuilding Industry Company for the construction of the vessels.

A Step in the Right Direction

We are positive with this development as it marks the deployment of its new generation of ultra-low emission tankers. Notably, this will be the first ammonia dual-fuel aframaxes in the world, putting MISC as the leader in sustainable maritime transportation. While this type of vessel still emits carbon to the atmosphere, we think this is a step in the right direction to make ammonia a viable fuel for the maritime industry. Recall that the company targets to deploy zero emission vessel (ZEV) that runs entirely on ammonia latest by 2030. This is part of its plan to decarbonise its shipping operation and to achieve net zero GHG emission by 2050. On the safety issue, we believe the risk is low as it has embarked to train the seafarers to safely manage and operate the vessels.

Earnings Impact

The company didn’t disclose the financial details of the contract. Nonetheless, we take this opportunity to make slight changes to our earnings forecast for FY26F onwards (Table 1) to account for three new LNG vessels that shall commence its operation following a new contract that it has secured with Qatar Energy recently.

Maintain BUY with unchanged TP RM10.10

We reiterate our BUY call on MISC with unchanged SOP-derived of TP of RM10.10 (see Table 2). We foresee multiple key re-rating catalysts on the stock coming from (i) new upcycle in tanker rate, (ii) new income stream from CCS value chain, (iii) maiden income from FPSO Mero 3 beginning FY25, and (iv) potential new FPSO contract award post-delivery of FPSO Mero 3.

Source: BIMB Securities Research - 23 Apr 2024