News     MISC announced that its major shareholder, PETRONAS had raised its offer price to privatise MISC to RM5.50/share from RM5.30/share previously.

At the same time, the Revised Offer shall remain open for acceptances up to 5.00pm on 19 Apr 2013.

As of last Friday, the acceptance level for the previous Offer (RM5.30/share) stood at 7.58%

Comments     This is not unexpected given that various parties, including the EPF, have disagreed with the Offer Price and hence the lukewarm acceptance level.

With the 7.58% acceptance level and its 62.67% stake in MISC, PETRONAS will need at least another 4.75% in acceptances from the minority shareholders to delist the shipping company.

The Revised Offer Price of RM5.50/share works out to a higher P/BV of 1.12x (BV/share as at Dec 2012 was RM4.93/share) from the previous Offer of 1.08x but this is still below the company’s historical average P/BV traded of 1.6x.

We maintain our recommendation of ACCEPT OFFER given that the revised offer is: 1) a better offer and 2) at a 19% premium above our SOP valuation of RM4.61.

Outlook     We believe that the shipping industry will continue to face tough times, especially for the Petroleum and Chemical segments, which will likely continue to be hurt by: 1) volatile charter rates versus unyielding bunker costs and 2) the imbalance in the demand and supply of vessels.

This could be seen in MISC’s weak historical earnings and is also likely to undermine any significant near-term rebound prospects for the stock.

Forecast     There are no changes in our earnings estimates.

Rating     Accept Offer    

Valuation    We have raised our target price to RM5.50 based on the revised offer price by Petronas, from RM5.30 previously.

Our SOP model values MISC at RM4.61, which 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