MISC’s  9M13  earnings  accounted  for  87%  of  our  full-year  forecast  – attributed to higher contribution from its joint-ventures (JVs), narrowing losses from  its  petroleum tanker  division and  weak bunker fuel prices. Thus,  we  upgrade  our  earnings  by  15-23%  for  FY13F-15F.  We  expect further growth in earnings moving on to FY14, of which we project 23%. We maintain our BUY call at higher FV of MYR6.09 (from MYR5.86).

• Beating  estimates.  MISC’s  9M13  earnings  (YTD:  +113%)  came  in above ours and consensus,  with  earnings during this  period accounting for 87% of our full-year forecast. 3Q13 was seasonally a stronger quarter for MISC on a q-o-q basis due to the pickup in shipping activities ahead of  the  winter  season.  The  boosts  to  earnings  were:  i)  higher-thanexpected  contribution  from  its  JVs,  ii)  narrowing  losses  from  the petroleum tanker division, and iii) weak bunker fuel prices.
• Key takeaways from  the  analysts’ briefing.  Management guided that the  worse  is  over  for  the  petroleum  tanker  business,  as  rates  have bottomed this year, and that it was on track for a recovery  towards next year by yielding a positive EBIT line. MISC said one liquefied natural gas (LNG)  vessel charter is expected to expire in June 2014, but talks are already ongoing with Petronas, which is keen on chartering the vessel. Indicative losses due to refurbishment of said LNG vessel could be to the tune  of USD20m. 2014 is shaping to be a better year,  with an estimated MYR16m  contribution  from  the  FPSO  Cendor  –  a  floating,  production, storage  and  offloading  (FPSO)  vessel  –  and  a  smaller  profit  from  its expanding tank terminal  in  Cyprus to commence sometime in mid-2014. Contribution to MISC’s share of the  expansion plans  there are  expected to be to the tune of USD2.5-5m for 2014.
• Earnings  upgrade,  maintain  BUY.  We  upgrade  our  earnings  by  15-23%  for  FY13F-15F  on  the  lower  bunker  fuel  assumptions,  higher contributions  from its JV partners and further narrowing losses from the petroleum  tanker  division.  Thus,  our  FV  is  raised  to  MYR6.09  (from MYR5.86) based on SOP and we maintain our BUY call. MISC trades at an  attractive  FY14F  P/E  multiple  of  12.5x  relative  to  the  other  peers steeper valuations.

Financial Exhibits

SWOT Analysis

Company Profile
MISC is a shipping conglomerate that has businesses in LNG shipping, petroleum tankers, offshore, tank terminals and exposure to oil & gas fabrication.

Recommendation Chart

Source: RHB