MISC Berhad: Recommendation Maintain BUY

“We retain a BUY call on MISC Berhad despite a slight earnings miss, as we believe its earnings have bottomed out.

“Our target price (TP) is revised to RM8.50/share (previously RM8.80), reflecting an 8-10% cut in earnings forecasts for FY25-FY26 due to weakness in the gas segment,” says Analysts.

The company is well-positioned to benefit from upcoming FPSO (Floating Production Storage and Offloading) tenders and potential value-unlocking opportunities post-first oil for the Marechal Duque du Caxias FPSO.

Key Highlights: MISC Berhad

1. Earnings Performance & Forecasts

• FY24 core net profit (CNP): RM2,178 million (-5% YoY)

• Performance was within consensus estimates but 6.3% below our forecast due to:

• Lower charter rates in the gas segment

• Higher cost provisions in the offshore division post-sail-away of the FPSO Marechal Duque Du Caxias (MDdC)

Earnings forecast cuts:

• FY25: -8%

• FY26: -10%

2. Gas Segment: Weakness Until 2026, But Bottoming Out

• Management expects a soft outlook until 2026 due to:

• New vessel influx and delays in new LNG liquefaction capacity

• LNG carrier rates declined further in Dec 2024:

• 160k & 179k CBM segments: -15%

• 145k CBM segment: -40% (lowest since 2023)

• Forecasted recovery:

• FY25: No growth

• FY26: +5%

• FY27: +15%

Post-FY26, demand expected to rise, assuming a 12% CAGR for global LNG liquefaction capacity between 2024-2029.

FPSO Segment: Growth Catalyst

MISC is a key beneficiary of the upcoming FPSO tender cycle, particularly in Malaysia.

Following the successful delivery of the Mero 3 FPSO, MISC is well-positioned for:

1 new FPSO conversion

2-3 FPSO redeployments

Estimated capex: US$2-2.5 billion

Potential Merger with Bumi Armada (BAB MK)

Feasibility study underway for a shares-based merger with Bumi Armada.

If successful, this could enhance MISC’s FPSO portfolio and growth prospects.

Investment Outlook

Valuation: New TP of RM8.50/share, implying CY26 EV/EBITDA of 11x, in line with its 10-year average.

Key Risks:

• Continued weakness in LNG charter rates

• Execution risks in FPSO projects

• Uncertainty in the potential Bumi Armada merger

Conclusion

Despite short-term gas segment challenges, MISC’s FPSO growth pipeline and potential merger with Bumi Armada provide strong long-term upside. We maintain a BUY rating with a TP of RM8.50/share.

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