News

Major shareholder (62.67%) Petronas has revised its offer to privatize MISC at RM5.50/share (from initial offer of RM5.30/share). The closing date has been extended to 19 April 2013.

The new offer price of RM5.50/share also applies to the existing shareholders who had accepted the original offer of RM5.30/share. Hence, Petronas is expected to fork out RM9.16bn for the privatization exercise.

As of 5 April 2013, Petronas has received 7.58% of the outstanding shares, in addition to its own shares of 62.67%.

Comments

The revised offer price of RM5.50/share did not come as surprise, as EPF (who holds 9.6% of MISC) and numerous minority shareholders had publicly expressed dissatisfaction on the existing offer price of RM5.30/share.

MISC share price was hanging around RM4-4.50 level (before Petronas offered to privatize the shipping conglomerate in early 2013) due to uncertainties surrounding MISC, especially on its Petroleum, Chemical and Container (disposed in 2012) shipping divisions.

Furthermore, MISC dividend payment had deteriorated severely over the past years due to decline in earnings.

We advise shareholders to accept the revised offer price of RM5.50/share, due to continued oversupply concern on Petroleum and Chemical shipping industries, affecting MISC earnings performance. Furthermore, US and Canada are developing own shale gas and oil resources, which may reduce the demand for oil imports into US.

Risks

• Continued oversupply of petroleum and chemical ships, depressing charter rates further.
• Increased in bunker cost.
• Slow recovery of global economy.

Forecasts

Unchanged.

Rating

Hold

• Positives –
  • Potential synergy from VTTI.
  • Stronger earnings post disposal of Liner Division.
  • Strong support from Parent Group, Petronas.
• Negatives –
  • Slow down in global economy growth.
  • Continued oversupply of tankers, pressuring freight rates.
  • High bunker cost.

Valuation

• Maintained hold with higher target price of RM5.50, based on offered price.

Source: Hong Leong Investment Bank Research - 08 Apr 2013