INVESTMENT HIGHLIGHTS

• Selling its stake in TWL

• No longer involved in inland container depot business

• Minimal impact in earnings

• Upgrade to BUY with unchanged TP of RM7.43

Selling its stake in TWL. MISC announced that its unit, MISC Enterprises Holdings Sdn Bhd (MEH) will be disposing its 25% stake in Trans-Ware Logistics (Private) Ltd (TWL) to John Keells Holdings PLC (JKH) for a consideration of RM4.2m. TWL is joint venture company owned by MEH, JKH and Keppel Logistics Pte Ltd (KLP). Upon the completion of the corporate exercise, TWL will no longer be an associate company of MISC.

No longer involved in inland container depot business. The container storage and transport operations of TWL have been discontinued back in November 2006, providing ground for such disposal by MEH. Prior to this, MISC exited the tank terminal business via the disposal of a 45% stake in the said business to Dialog Group for RM193m less than two months ago. In view of this, MISC’s disposal of its non-core assets would enable greater focus on its core energy transportation business.

Minimal impact on earnings. The disposal consideration of RM4.2m represents less than 0.1% of MISC’s total assets which is very small. Henceforth, we think that the disposal will not significantly impact MISC’s earnings. Nonetheless, such corporate exercise is an initiative undertaken by MISC to slowly provide emphasis on its core businesses.

Upgrade to BUY with unchanged TP of RM7.43, amid a retreating share price trend. We maintain our TP of RM7.43 which is pegged to a 0.9x price-to-book which is -1.5 standard deviations below its 5-year pending its 3QFY17 results this Friday. Impetus for us to revisit our TP on MISC include a change in supply-demand dynamics in the LNG & petroleum transportation market and the securing of sizable projects in the offshore segment.

Source: MIDF Research - 1 Nov 2017