Journey to Wealth
MISC Berhad - Privatisation Bid By Petronas
News MISC announced that a takeover bid had been initiated by one of its major shareholders, Petronas (which has a current shareholding of 62.67%) for the remaining 37.3% shareholding in MISC that it (Petronas) does not own at an offer price of RM5.30/share.
Comments We are pleasantly surprised by the takeover bid, as this had not been known by the market.
In our opinion, the move by Petronas could imply that there is a need for a further internal restructuring by MISC.
The RM5.30/share price tag works out to a P/BV of 1.16x (BV/share as at 3QFY12 was RM4.54/share), which is below the company's historical average P/BV traded of 1.6x.
However, we deem the pricing as fair given that it is: 1) at a premium of 19% above the last closing price of RM4.45; 2) at a premium of 15% above our target price of RM4.61; and 3) at a premium of 3.1% above the consensus' target price of RM5.14.
Outlook We still believe that there will be tough times for the shipping industry, especially for the Petroleum and Chemical segments which continue to be stumped by: 1) volatile charter rates versus unyielding bunker costs; and 2) the imbalance in the demand and supply of vessels.
This has been evidenced by MISC's weak historical earnings and is also likely to undermine any significant near-term prospects for the stock.
Forecast There are no changes to our earnings estimates.
Rating Accept Offer
Valuation Reverting to target price of RM5.30 based on offer price by Petronas.
Previously, our SOP-based target price of RM4.61 excludes the value of the assets of its Petroleum and Chemical Shipping division as we expect the division to remain loss-making in the near future.
Risks 1) Lower charter rates and 2) a higher bunker cost.
Source: Kenanga
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