News

MISC has entered into an agreement (SPA) to sell its 15.73% stake in NCB to MMC Group for a cash consideration of RM221.98m.

NCB is a port operator in Port Klang, with related businesses including haulage, freight forwarding, ancillary services and shipping services. Financial Impacts

Immaterial earnings contribution from NCB, given the 15.7% is only recognized at MISC’s investment level.

Comments

We are positive on disposals of NCB, given the stake has been re-categorized as non-strategic investments for its loss of synergistic value post MISC exit from the container business in 1H12 and disposal of MILS (MISC Integrated Logistics) in 2H14.

Moreover, the disposal price is valued at RM3.00/share of NCB, higher than the last traded share price of RM2.63/share and BV of RM2.96/share (as reported in latest 3Q14 result).

Risks

• Continued oversupply of petroleum and chemical ships, depressing charter rates further.
• Lack of new contracts for MMHE and Offshores.
• Slow recovery of global economy.

Forecasts

• Unchanged, as earnings contributions from NCV is immaterial towards the MISC Group earnings while the selling price is almost equivalent to book .

Rating

HOLD

Positives

• Stronger earnings post disposal of Liner Division.
• Strong support from Parent Group, Petronas.

Negatives

• Slowdown in global economy growth.
• Continued oversupply of tankers, pressuring freight rates.
• Low order-book replenishment by MMHE.

Valuation

• Maintained Hold recommendation with unchanged target price of RM7.00 based on SOP.

Source: Hong Leong Investment Bank Research - 28 Nov 2014