MISC recorded 4Q21 core earnings of RM467m (+10% QoQ, -10% YoY), bringing FY21 core earnings to RM1,670m (-21% YoY). We deem the results to be well within expectations, coming in at 97% of our full-year forecast and 100% of consensus full-year estimates. We make no changes to our FY22-23f earnings forecast. Maintain BUY with an unchanged SOP-derived TP of RM7.67. We like MISC for its: (i) defensive nature of the name due to its portfolio of long-term charters which will provide consistent, recurring cash flows; and (ii) its fixed dividend payout policy of 33sen/year.

Met expectations. MISC recorded 4Q21 core earnings of RM467m (+10% QoQ, -10% YoY), bringing FY21 core earnings to RM1,670m (-21% YoY) after adjusting for (i) impairments on assets and receivables totalling RM182m; and (ii) other EIs amounting to RM212m. We deem the results to be well within expectations, coming in at 97% of our full-year forecast and 100% of consensus full-year estimates. Term to spot portfolio mix for its petroleum segment stood at: (i) VLCC: 94:6; (ii) Suezmax (72:28); and (iii) Aframax (60:40).

Dividend. Fourth and final interim dividend of 12.0sen/share (ex-date: 3 March 2022, payment: 16 March 2022) was declared, bringing FY21 DPS to 33.0sen/share, which was well expected.

QoQ. Core earnings were up 10%, attributed to: (i) higher earnings days from its LNG segment – as LNG spot rates soared in 4Q21 amid low gas inventories and seasonally higher winter demand for LNG; and (ii) higher blended TCE for its Petroleum tanker segment throughout the quarter.

YoY. Core earnings were down 10% attributed to: (i) weaker performance from its Petroleum tanker segment (where PBT almost halved YoY); (ii) lower recognition of construction profit from the Mero 3 FPSO; and (iii) additional cost provision recognised for ongoing projects (likely to be Jerun and Kasawari) from its 65%-owned MMHE.

YTD. Core earnings were down 21% YoY mainly due to suppressed petroleum tanker rates with tonnage oversupply and depressed freight rates due to low seaborne oil trade activities globally despite the recovery in oil demand and easing of production cuts by OPEC+.

Outlook. We expect a better year ahead in 2022 for MISC as the group has guided for: (i) a decent outlook for the LNG shipping division on the back of elevated newbuilding orders to meet new tonnage requirements for upcoming LNG projects – including the massive Qatar North Field Expansion project; and (ii) signs of robust offshore spending in 2022 – MISC may be a key beneficiary for new global FPSO projects over the next 12-24 months, which are expected to be centred around Latin America, Asia Pacific and Africa. We expect 2022 to be a better year for its petroleum tanker division as oil demand and trade recovers.

Forecast. We make no changes to our FY22-23f estimates.

Maintain BUY – TP of RM7.67. We maintain our BUY rating with an unchanged TP of RM7.67/share. We like MISC for its: (i) defensive nature of the name due to its portfolio of long-term charters which will provide consistent, recurring cash flows; and (ii) its fixed dividend payout policy of 33sen/year. This translates into a decent dividend yield of 4.5% annually based on current share price.

Source: Hong Leong Investment Bank Research - 18 Feb 2022