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MISC boosts production outlook on oil demand recovery

MISC Bhd expects the recovery in oil demand following the Covid-19 vaccine rollout and stable oil price environment will pave the way for increased activity levels in the global offshore exploration and production space.

MISC, in a Bursa Malaysia filing yesterday, stated its offshore business segment will be very selective on growth opportunities as it focuses on its new floating production storage and offloading (FPSO) project in hand.

The segment will continue to monitor the market for the next major project as and when the right opportunity arises as its existing portfolio of long-term contracts will continue to support its financial performance.

“For the marine and heavy engineering segment, aligned with the recent recovery in oil price, several deferred projects have since been revived and its efforts to replenish its orderbook have generated positive results with the recent award of the engineering, procurement, construction, installation and commissioning contract for the SK408W Jerun Development Project, offshore Sarawak,” MISC noted.

The oil and gas-related logistics group said the volatile industry condition and the wider lingering effects of the Covid-19 pandemic remain major risks moving forward. MISC’s marine and heavy engineering segment maintain an optimistic stance regarding its business prospects throughout the year and into 2022.

“The prospects of acquiring more marine repair projects are highly dependent on the reopening of borders and worldwide recovery from the Covid-19 pandemic.

“The segment expects the marine business to remain challenging, but will continue to pursue business opportunities in other areas and new regions to grow its orderbook,” it stated.

AmInvestment Bank Bhd analyst Alex Goh, in a note yesterday, stated the gradual easing of OPEC+ quotas from May-July 2021 and gradual rollouts of Covid-19 vaccinations towards the second half of the year offer brighter prospects for MISC’s petroleum segment.

“Together with the upcoming delivery of two liquefied natural gas (LNG) carriers, five very large ethane carriers and two dynamic positioning shuttle tankers this year, these underpin our financial year 2022 forecast earnings growth expectations,” Goh noted.

The research house kept its ‘Buy’ call on the counter with a lower fair value of RM7.75 per share from RM8.50 previously with a lower earnings assumption for its petroleum division given the ongoing soft demand for very large crude carriers.

MISC posted a net profit of RM429.8 million in its first quarter ended March 31, 2021 (1Q21), against a net loss of RM1.16 billion a year ago due to higher earning days in the petroleum and product shipping and LNG asset solutions segments.

Turnover for the quarter increased marginally to RM2.54 billion from RM2.51 billion a year earlier, lifting its earnings per share to 9.6 sen for the quarter compared to a loss per share of 25.9 sen in 1Q20.

Group operating profit of RM463.8 million was RM381.3 million or 45.1% lower than the corresponding quarter’s profit of RM845.1 million.

MISC declared an interim dividend of seven sen a share, which was similar to last year.

MISC’s LNG asset solutions segment posted revenue of RM685.7 million in the quarter, a 1.5% drop versus RM695.9 million revenue it made in 1Q20, mainly due to the strengthening of the ringgit against the greenback.

Petroleum and product shipping segment revenue was RM795.1 million, 35.3% lower from RM1.23 billion made in 1Q20 mainly due to lower freight rates in the recent quarter.

MISC’s offshore business posted a revenue of RM696 million in the quarter compared to RM238.1 million recorded in 1Q20, mainly from the recognition of construction revenue for an FPSO vessel in the quarter.

Its marine and heavy engineering segment recorded marginally lower revenue of RM343.5 million from a lower number of vessels secured for repair and maintenance works in the marine segment.

“This was due to the limited volume of marine repair projects in the current market as a result of high charter rates offered for shipments during the prolonged winter period and the lingering effects of the pandemic,” MISC stated in its filing.
Source: The Malaysian Reserve

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