• Maintain BUY (TP: RM10.30). MISC 1Q24 core PATAMI of RM698mn was inline with both our and consensus’ estimate at 27% and 29% respectively. Excluding non-core items, core PATAMI was largely comparable with 1Q23 despite lower construction gain from FPSO Mero 3 which has moved to commissioning phase. A higher 1st interim DPS of 8sen was declared against 1Q23 DPS of 7sen. We expect MISC to post better earnings in FY24 to be driven by MMHE’s recovery from large cost provision of c.RM450mn in FY23. We maintain our BUY call on MISC with a higher SOP-derived TP of RM10.30 (from RM10.10). The adjustment was made following the update to our FY23 figure based on the audited account.

• Key Highlights. 1Q24 headline PATAMI grew by 24% YoY to RM760mn from RM613mn in 1Q23 mainly due to (i) one-off gains from disposal of ships in 1Q24 amounting to RM74mn, and (ii) oneoff impairment of PPE in 1Q23 amounting to RM96mn.

• Earnings forecast. No changes.

• Outlook. Rates in petroleum tanker (Refer to Chart 1) remain elevated which will support MISC’s earnings in coming quarters. The company will be selectively pursuing new FPSO project amidst strong demand despite rising development costs. MMHE is also expected to benefit from greater demand for conversion projects amidst upcycle in Oil and Gas development.

Source: BIMB Securities Research - 31 May 2024