THE Mero-3 project win by MISC Bhd is viewed positively by analysts as it marks MISC’s maiden venture into the Brazilian premium leased floating production storage and offloading (FPSO) market.
“According to Upstream, the Mero-3 FPSO will be similar in size to the first two units ordered by Petrobras (Petroleo Brasileiro) , with a production capacity of 180,000 barrels per day of oil and 12 million cubic metres per day of natural gas,” said RHB analyst Sean Lim.
This follows MISC being awarded letters of intent by Petrobras for the provision of a FPSO facility located off Rio de Janeiro in the Libra block, which is in Brazil’s Santos Basin, as well as the corresponding operations and maintenance services. The contracts have a duration of 22.5 years and are expected to begin by 1H24.
However, the major work is unlikely to be undertaken by MISC’s 66.5% owned fabrication yard, Malaysia Marine and heavy Engineering Holdings, given the client’s local content requirement of 40%, according to AmInvest analyst Alex Goh.
“Upstream reported that MISC has lined up at least 7 Asian yards to undertake the conversion process. Five Chinese yards – Cosco Shipping Heavy Industry, CIMC Raffles, CMHI, Bomesc Offshore Engineering and DSIC – as well as Singapore-based Sembcorp Marine and Keppel yards are in negotiations with MISC,” said Goh.
TA Securities analyst Kylie Chan is also positive on the win, noting that this allows MISC to establish a foothold in the prolific Brazilian FPSO market. Noted as well was that FPSO projects are highly coveted for high margins and stable long term earnings visibility.
Chan also noted that MISC’s robust net gearing of 0.2x and cash pile of RM8.4 bil implies an ample capacity for the group to finance this project.
“This is essential given the extended vessel construction period of three years. As such, project risks largely lie in project execution.”
The execution risks, according to Chan, lie in MISC’s limited track record in managing large international FPSO projects.
RHB maintained a buy call with a revised target price of RM8.91 from a previous RM9. AmInvest maintained a hold call with a fair value of RM7.70. TA also maintained a buy call, with an unchanged target price of RM9.
At the end of the trading day, MISC’s shares were last done at RM7.81, down 2 sen, with 1.96 million shares traded. – Aug 18, 2020
