KUALA LUMPUR: RHB Investment Bank Bhd (RHBIB) is generally positive on MISC Bhd’s three new liquefied natural gas (LNG) carrier charter contracts inked with QatarEnergy, which should increase its recurring income base.
However, the investment bank expressed some reservations on the potential returns of these contracts, pending further disclosures by management.
“We think it has to lock in much stronger charter rates than the current spot rates in order to fetch decent project returns, given the elevated asset prices,” it said in a research note today.
MISC announced yesterday that it has been awarded 15-year long-term time charter contracts by the Qatar state-owned energy company for three newbuild LNG carriers.
The shipping firm said the vessels would be built by Samsung Heavy Industries Co Ltd and the contracts are set to begin in 2026, but it did not mention the value of the contracts.
RHBIB said that while there is limited disclosure on the contracts, the project’s internal rate of return (IRR) could be rather unexciting, as asset prices are now more expensive compared to MISC’s previous contract win.
It also noted that MISC has 31 LNG carriers as of the end of the financial year ended Dec 31, 2023 (30 owned, 1 chartered-in) and another 14 newbuilds (including 12 25 per cent-owned vessels to be chartered to QatarEnergy).
“We still like the company for its steady operating cash flow, with anticipation of a boost from the Mero-3 (floating, production, storage and offloading vessel) project from the second half of 2024,” it said.
Reiterating a “buy” recommendation with an unchanged target price of RM8.94, it said risks to its recommendation include higher vessel operating costs, contract termination, and regulatory risks.
Meanwhile, Kenanga Research also maintained its “market perform” call on MISC with a TP of RM7.69 — up from RM7.51 previously — noting that contributions from the three vessels would not come in during its forecast period.
It estimated the daily charter rate at US$120,000 (US$1=RM4.74), which it said should potentially add a net profit of RM75 million to MISC per annum.
Kenanga Research said risk to its call include lower-than-expected utilisation and spot rates for its fleet, Mero-3 additional cost overruns and project delays, and further production cuts by major oil producers.
As at 10.14 am, MISC shares were 9.0 sen higher at RM7.75 with 482,000 shares traded. – BERNAMA
