MISC Bhd has bagged a contract from Pengerang LNG (Two) Sdn Bhd, a 65%- owned unit of Petronas Gas Bhd, to supply, operate and maintain a LNG FSU in Pengerang, Johor, with an estimated contract value of up to USD213.7mn. While the contract is small, we view the contract positively as this would extend the commercial life of the Puteri Delima Satu LNG vessel beyond 20 years and provide long-term earnings visibility. Assuming that the FSU is commercially operational by 2QFY25, we estimate that this will improve MISC’s FY25 earnings by 0.4%. Maintain Buy with an unchanged TP of RM8.60/share based on 16.5x CY24 EPS.

Details of the Contract

MISC Bhd has bagged a contract from Pengerang LNG (Two) Sdn Bhd, a 65%- owned unit of Petronas Gas Bhd (PETGAS), to supply, operate and maintain a liquefied natural gas (LNG) floating storage unit (FSU) in Pengerang, Johor with an estimated contract value of up to USD213.7mn (RM1.0bn). The agreement is valid for 20 years from the expected operation date in the second quarter of 2025 and may be extended based on mutual agreement.

MISC will convert the LNG carrier, Puteri Delima Satu, into the FSU. The 2002-built LNG carrier with steam turbine propulsion completed her long-term charter in early 2023 and is currently in lay-up.

The FSU contract is a continuation of the collaboration between MISC and PETGAS in 2012 that brought about the deployment of FSU Tenaga Satu and FSU Tenaga Empat at the LNG regasification terminal in Sungai Udang, Melaka. The FSU will receive shore power to reduce emissions while improving operational efficiency.

Our Take

While the contract is small, we view the contract positively as this would extend the commercial life of the Puteri Delima Satu LNG vessel beyond 20 years and provide long-term earnings visibility. MISC previously disclosed its intention to extend the useful life of LNG vessels via routine drydocking exercises, believing that the useful life of these vessels may stretch up to 25-30 years.

The contract translates into a daily charter rate (DCR) of USD29.3k. Assuming that the FSU is commercially operational by 2QFY25, we estimate that this will improve MISC’s FY25 earnings by 0.4%

Impact

We Tweak Our FY25 Earnings Forecasts Up by 0.4%.

Valuation

Maintain Buy with an unchanged TP of RM8.60/share based on 16.5x CY24 EPS.

Source: TA Research - 1 Nov 2023