An analyst from the Malaysia-headquartered CIMB bank has recommended a ‘hold’ status for shipping line MISC because of the low revenue from its LNG and chemical tankers segments.
Raymond Yap cited that profit from MISC’s LNG arm had fallen 22% year on year (y/y) on the back of the expiry of two long-term contracts for Puteri Intan and Puteri Delima in September 2014 and February 2015 respectively, as well as the expiry of one short-term charter for Seri Bakti in the first quarter of 2015. In the meantime, the company also experienced higher dry-docking days in the last quarter of 2014 and first quarter of 2015 that continued to weaken its LNG shipping revenue.
Yap expects weaker results in the second quarter with the only variability coming in the form of the number of dry-docking days for which there is no guidance from MISC. However, he foresees an improvement from third quarter onwards due to commencement of Puteri Intan and Puteri Delima for their 10-year charters to Petronas from September 2015. In addition, Seri Bakti should also recommence employment from third quarter, but its recommencement will be offset by the expiry of Puteri Nilam from employment in August 2015.
Meanwhile, Yap also noted that the MISC’s petroleum business segment has earned two consecutive quarters’ of profit, namely in the last quarter of 2014 and first quarter of 2015, due to the strong freight rates. He also highlighted that MISC’s chemical tanker losses have declined in the first quarter, thanks to the disposals of loss-making tanker assets and the decline in bunker prices. However, the gains were offset by the weak demand of both palm oil and chemical tanker shipping rates, prompting the MISC’s chemical tanker losses to rise from 24.5% in the first quarter of 2014 to 28.9% in the first quarter of 2015.
He urged investors to hold on to MISC’s stocks and set a targeted price of MYR9.35 (USD3.45) per share. The company’s stock currently trades at around MYR9.15 per share.
This post was sourced from IHS Maritime 360: View the original article here.
