MISC’s wholly-owned subsidiary, AET Inc. has signed shipbuilding contracts with Samsung Heavy Industries Co Ltd for the construction of four new 113,000 dwt Aframax vessels, to be delivered in 2018. AET has also signed shipbuilding contracts with Hyundai heavy Industries to construct two new 158,000 dwt Suezmax vessel and two new 114,000 dwt LR2 product vessel. The combined value of the contract is US$500m. The Aframax and Suezmax contracts are entered into as part of AET’s ongoing fleet renewal plans, while the two LR2 product vessels are tied to longterm time charters. (Bursa Malaysia)

Comments: Given the uptrend in the Petroleum shipping freight rate, the new shipbuilding should be positive for the group. While positive, impact may be minimal as the Aframax and Suezmax are part of its ongoing fleet renewal plans. Currently, MISC operates 36 aframax vessels and four Suezmax vessels. We maintain our HOLD rating and TP of RM8.30.

Source: Affin Hwang Capital Research - 29 Oct 2015