MISC (3816) - MISC Bhd - Good times in 2015
Target RM9.06 (Stock Rating: ADD)
At 97% of our and 110% of consensus full-year expectations, MISC's 2014 core net profit was in line with our forecast but above consensus. Petroleum tankers made a profit amid a rally in freight rates, while the offshore division’s earnings stepped up following the commencement of FPSO Cendor and a rise in FPS Gumusut's charter rates. We raise FY15-16 EPS by 1-5% and keep our SOP-based target price. Maintain Add, with brighter petroleum tanker prospects and improving relations with Petronas as key catalysts.
Highlights in 4Q14 and 2014
MISC's 4Q14 core net profit rose 18% yoy due to a turnaround in the petroleum tanker business and higher offshore profits. MISC's petroleum tankers posted pretax profit of US$5.4m (vs. loss of US$17.5m in 4Q13), thanks to a rally in freight rates. Meanwhile, offshore earnings expanded 70% yoy following the commencement of FPSO Cendor and a permanent step-up in FPS Gumusut's charter rates. LNG earnings slipped 11% yoy in 4Q14 due to higher incidences of dry docking and the expiry of Puteri Intan's contract in September 2014. Nonetheless, FY14 pretax profit from the division was still 8% higher yoy. MISC closed its books in 2014 with a 29% rise in full-year core net profit, driven by the improvements in the LNG, petroleum, chemical and offshore segments, partly offset by the weaker contribution from MMHE. MISC announced a dividend of 6 sen, bringing FY14 DPS to 10 sen, higher than our 9 sen estimate.
Downsized chemical tanker fleet here to stay
Following the termination of an agreement to sell the seven owned A-class chemical tankers last year, MISC will no longer actively seek buyers for the vessels unless an attractive offer comes along. Nonetheless, given the benefits of lower bunker prices and a smaller fleet, margins for the chemical tanker segment are likely to improve, and we expect losses to narrow by 90% this year.
Petroleum tankers and offshore to drive growth in 2015
In our view, tanker rates are poised for perform better in 2015 on the back of a favourable supply-demand balance and a potential increase in offshore oil storage. Meanwhile, the full-year contribution from FPSO Cendor in 2015 and an increase in FPS Gumusut's charter rates are likely to make the offshore business one of MISC's key earnings growth drivers this year, with offshore pretax profit expected to rise by 37% yoy in 2015.
Source: CIMB Daybreak - 09 February 2015
Target RM9.06 (Stock Rating: ADD)
At 97% of our and 110% of consensus full-year expectations, MISC's 2014 core net profit was in line with our forecast but above consensus. Petroleum tankers made a profit amid a rally in freight rates, while the offshore division’s earnings stepped up following the commencement of FPSO Cendor and a rise in FPS Gumusut's charter rates. We raise FY15-16 EPS by 1-5% and keep our SOP-based target price. Maintain Add, with brighter petroleum tanker prospects and improving relations with Petronas as key catalysts.
Highlights in 4Q14 and 2014
MISC's 4Q14 core net profit rose 18% yoy due to a turnaround in the petroleum tanker business and higher offshore profits. MISC's petroleum tankers posted pretax profit of US$5.4m (vs. loss of US$17.5m in 4Q13), thanks to a rally in freight rates. Meanwhile, offshore earnings expanded 70% yoy following the commencement of FPSO Cendor and a permanent step-up in FPS Gumusut's charter rates. LNG earnings slipped 11% yoy in 4Q14 due to higher incidences of dry docking and the expiry of Puteri Intan's contract in September 2014. Nonetheless, FY14 pretax profit from the division was still 8% higher yoy. MISC closed its books in 2014 with a 29% rise in full-year core net profit, driven by the improvements in the LNG, petroleum, chemical and offshore segments, partly offset by the weaker contribution from MMHE. MISC announced a dividend of 6 sen, bringing FY14 DPS to 10 sen, higher than our 9 sen estimate.
Downsized chemical tanker fleet here to stay
Following the termination of an agreement to sell the seven owned A-class chemical tankers last year, MISC will no longer actively seek buyers for the vessels unless an attractive offer comes along. Nonetheless, given the benefits of lower bunker prices and a smaller fleet, margins for the chemical tanker segment are likely to improve, and we expect losses to narrow by 90% this year.
Petroleum tankers and offshore to drive growth in 2015
In our view, tanker rates are poised for perform better in 2015 on the back of a favourable supply-demand balance and a potential increase in offshore oil storage. Meanwhile, the full-year contribution from FPSO Cendor in 2015 and an increase in FPS Gumusut's charter rates are likely to make the offshore business one of MISC's key earnings growth drivers this year, with offshore pretax profit expected to rise by 37% yoy in 2015.
Source: CIMB Daybreak - 09 February 2015
