An undervalued blue chip with decent DY. MISC is an attractive value play among blue chips, supported by undemanding valuations of 0.89x P/B (-19% below 10Y 1.1x) and 15.8x FY21 P/E (-8% below 10Y 17.2x), decent DY at 4.5% FY21E and strong parentage support from Petronas (with a 51% stake). We believe that MISC would be able to weather through the fluctuations in charter rates for its LNG and Petroleum segment through its capacity expansions and long-term charters for its LNG segment. Meanwhile, its 6 VLEC contracts secured in July will further boost the group’s sustainable and recurring income streams. Moreover, freight rates could be heading toward an upward inflection point in FY21, driven by the Covid-19 vaccines otpimism and additional US stimulus to kickstart the economic recovery.

MISC daily: Potential downtrend reversal following the hammer and long-leg Doji formations

Potential downtrend reversal following the hammer and long-leg Doji formations. Following the selldown from RM7.88 high (17 Nov), the hammer (14 Dec) and long-legged doji (15 Dec) candles are deemed to be positive, signalling that the forces of supply and demand are nearing equilibrium and the downtrend could be nearing its tail-end. We believe MISC could see a potential downtrend reversal soon, supported by the mild upticks in technical indicators and a 4.1x higher volume done yesterday amounted to 9.6m shares (vs 90D average of 2.3m). A decisive breakout above downtrend line near RM6.88 (50D SMA) will spur prices higher to re-challenge RM7.27 (100D SMA) and our LT objective at RM7.53 (200D SMA) hurdles. Supports are situated at RM6.50 and RM6.38 (52W low). Cut loss at RM6.31.

Source: Hong Leong Investment Bank Research - 16 Dec 2020