Petroliam Nasional Bhd's RM8.8 billion (US$2.9 billion) buyout offer for MISC Bhd undervalues the world's second-largest liquefied natural gas shipping company, two minority shareholders said.

Penang Development Corp, which claims to own 1.3 per cent of MISC, has written to request meetings with the heads of the shipper's two biggest shareholders, Petroliam Nasional and Employees Provident Fund, according to copies of the letters to the media. The offer price of RM5.30 per share is "on the low side," said a separate e-mail from Pacific Mutual Fund Bhd, which owns 0.1 per cent, according to data compiled by Bloomberg.

"The price offered for MISC apparently undervalues the assets and businesses of the company and its future prospects," Lim Guan Eng, Penang Development's chairman, said in the letter to Petroliam Nasional Chief Executive Officer Shamsul Azhar Abbas. The bid is below share price targets at some investment banks, including KAF-Seagroatt and Campbell Bhd which has an estimate of RM6.80, he said.

MISC completed a rights issue at RM7 per share in February 2010. The stock subsequently tumbled 44 per cent before last week's offer as the company booked losses and exited the liner industry. It rebounded 17 per cent yesterday to RM5.22, the steepest increase in 14 years.

"Long-term funds may deem the offer not attractive enough," Ahmad Maghfur Usman, an analyst at OSK Holdings Bhd, wrote in a Feb. 4 report, advising investors to reject the bid. "The upside potential on MISC is worth the wait given that its earnings will continue to improve following its exit from the liner business. Impatient shareholders may opt to take up the offer and exit."

Premium Offered

Petronas, as the energy company is known, already owns almost 63 per cent of MISC shares, according to data compiled by Bloomberg. A buyout would provide it with greater flexibility in deciding MISC's strategic direction, the group said last week.

MISC rose 0.4 per cent to RM5.24 as of the 12:30 p.m. trading break in Kuala Lumpur today. The offer price is a 19 per cent premium over the stock's last traded price of RM4.45 before the Jan. 31 bid, a level last seen in April 2012.

Penang Development, a unit of the Penang state government, said it owns MISC shares worth about RM300 million at the offer price. It's been a shareholder since 1975, said Lim, also chief minister of the opposition-controlled state.

Lim expressed his concern in separate letters to Petronas' Shamsul and Employees Provident Fund Chief Executive Officer Azlan Zainol, copies of which his office e-mailed to the media.

The Employees Provident Fund, Malaysia's biggest pension fund, owns 9.7 per cent of the shipper, according to data compiled by Bloomberg. EPF isn't part of Petronas' buyout bid.

"The offer price is on the low side for investors with longer term investment horizons as we expect MISC's earnings to bottom in 2012 and start recovering in 2013 and 2014," said Pacific Mutual, a Kuala Lumpur-based fund which manages about RM1.8 billion.

Azman Ibrahim, a spokesman for Petronas in Kuala Lumpur, wasn't immediately available for comment when e-mailed and phoned at his office today.

MISC operates the world's second biggest fleet of LNG ships after Qatar Gas Transport Co, according to Clarkson Plc, the world's largest shipbroker. The group shuttered its container- ship business last year to focus on LNG tankers after the cargo- box unit posted US$789 million of losses over three years due to global overcapacity and falling rates. -- Bloomberg