MISC; Buy; RM5.42
Price Target: RM6.50; MISC MK

MISC entered into an agreement to acquire the remaining 20% stake in Malaysia Offshore Mobile Production (Labuan) Limited (MOMPL) that it does not own for US$18m cash. MOMPL owns two mobile offshore production units (MOPUs). The valuation seems attractive at 9x on our estimated profit. The acquisition would also allow the Group better control over MOMPL. However, the contribution is small considering the Group’s RM1.3bn net profit base.

We believe the stock remains undervalued at 1.1x book with its resilient LNG cashflows, solid oil & gas assets, and significantly stronger balance sheet following the sale of:- (1) 50% stake in Gumusut-Kakap and; (2) the liner business. We maintain our BUY call with sum-of-parts based target price of RM6.50. 

Source: HwangDBS Research - 18 Dec 2013