ANALYSTS are mixed on MISC Bhd following its contract win worth US$525.6 mil, as this spells recurring revenue for the company moving forward.
MISC recently won a contract from Petróleo Brasileiro (Petrobras), which is the second petroleum tanker contract award in three months for MISC and will commence in MISC’s 2022 financial year. It is for the operation and owning of three newbuild Suezmax class Dynamic Positioning 2 (DP2) shuttle tankers.
According to MIDF Research analyst Adam Mohamed Rahim, the contract is estimated to provide a revenue of about RM308.5 mil a year, assuming the usual tenure of five to seven years, along with an implied daily charter rate of between US$65,000 and US$80,000.
“In terms of additional annual pre-tax profit contribution, we estimate approximately RM30.9 mil per annum based on a conservative pre-tax profit margin of 10%, which is the historical trend when the petroleum tanker segment was profitable.
“The expected contribution from this contract is below 1% of the pre-tax profit estimated for FY22 assuming an annual growth in earnings of 5.0%,” said Adam, who maintains a neutral recommendation with an unchanged target price of RM8.35.
“Although this latest contract award has a rather small value, we expect more contracts especially for the offshore segment to be secured from FY20, as guided by the management,” he added.
However, AmInvestment Bank Research analyst Alex Goh is positive on the latest development, maintaining a buy recommendation with a fair value of RM9.75, noting that the three new tankers will be in addition to the six similar tankers earlier contracted by Petrobras, of which one was already delivered while the other five are slated for later this year.
Goh also noted that tanker rates have generally improved year-on-year, with daily charter rates for Suezmax vessels rising 69%, even though the winter season in the northern hemisphere appears to be relatively mild.
RHB Research analyst Sean Lim maintained a buy call with an unchanged target price of RM9.21, noting that the contract win helps to secure long-term quality income for MISC.
“Currently, MISC has four operating DP2 shuttle tankers, and the remaining 10 vessels will be coming online gradually. Also, the new contracts will further strengthen its business relationship with Petrobras, since these three vessels will be in addition to the six earlier contracted by Petrobras,” said Lim.
At the noon close, MISC’s shares were last done at RM8.25, up 29 sen, with 2.75 million shares changing hands. – Feb 6, 2020
