News

MISC Berhad announced to Bursa Malaysia that AET Tanker Holdings Sdn Bhd (AET), its whollyowned subsidiary, has on 11 March 2016, acquired two ordinary shares of RM1.00 each representing 100% equity interest in AET Product Tankers Sdn Bhd (AETPT) for a total cash consideration of RM2.00.

The principal activity of AETPT is to own and operate product tankers for the merger of MISC’s chemical tanker fleet with AET’s clean tanker fleet.

Comments

We are neutral on the move as we view it as an internal reorganisation with AET acquiring the 13 chemical tankers and 1 LPG currently operated by MISC and merging them with its own fleet of eight clean petroleum products (CPP) to create a new, single entity in the name of AETPT.

MISC’s chemical tankers consist of 7 “Bunga A” class vessels (capacity: 38,000 dwt), 6 “Bunga L” class (capacity: 19,900 dwt) and one LPG vessel (capacity: 20,613 dwt) which are all currently operated on long-term bareboat charters. No changes will be made to the flag or classification society and MISC Berhad will continue to provide technical management for the chemical tankers and LPG vessel.

While there will be no financial impact arising from the merger, we understand that the new entity will be able to offer value-added services to its customers through offering additional capacity and flexibility in a wider range of options as both divisions share many common customers. Management also opined that higher vessel utilisation rate can be achieved with the larger fleet by enhancing the ability or chances to secure opportunistic fixtures.

Outlook

Moving forward, we think the earnings growth momentum can be sustained with the charter renewal of five Puteri class carriers and five newbuild contracts; the first two new LNG vessels are expected to be delivered in 2H16 and we expect the new delivery to drive earnings growth in FY16.

Forecast

We made no changes to our earnings forecast.

Rating

Maintain OUTPERFORM

Valuation

Our TP is maintained at RM10.64, based on unchanged 1.25x PBV FY16E, on par with +1SD over 5-year mean.

Risks to Our Call

Lower-than-expected charter rates.

Worse-than-expected slowdown in global economy.

Source: Kenanga Research - 14 Mar 2016