KUALA LUMPUR: MIDF Research opined that MISC Bhd’s resilient financial performance in the financial year ended Dec 31, 2021 (FY21), coupled with higher demand for both petroleum and liquefied natural gas (LNG) over the expected long winter and geopolitical tensions, will be favourable to the group’s near-term prospects.
it said MISC had the opportunity to leverage not only on the price hike, but also on the account of the transition to cleaner energy and eco-friendly operations.
“We reiterate our positive view on MISC due to its robust order book and balance sheet, strong performance on its LNG shipping and offshore businesses, on improving demand, and varied business strategies that allow for operation and income mitigation,” it said in a research note today.
MISC posted a net profit of RM1.83 billion in FY21 against a net loss of RM43 million in the previous year.
The provider of international energy-related maritime solutions and services returned to the black after its 2020 performance was weighed down by provisions for litigation claims, write-offs and losses following the outcome of arbitration proceedings by Gumusut-Kakap Semi-Floating Production System (L) Ltd against Sabah Shell Petroleum Company Ltd.
The group’s revenue in 2021 was RM10.67 billion, 13.51 per cent higher than in the year before, mainly because of the recognition of revenue from the conversion of an floating production storage and offloading in the offshore business segment.
MIDF Research noted that the LNG shipping market had been seeing a jump in demand over the winter season in the northern hemisphere; disbalanced by high rates due to tight LNG supply and LNG price hike, tight vessel availability, and long shipping distances.
It added that the petroleum shipping market on the other hand had been clouded with low freight rates with little improvement on the back of uncertainties over the Omicron variant infection spread.
“Nevertheless, the positive outlook on the upstream subsector will continue to feed on the growing demand for floating production storage and offloading (FPSOs),” MIDF Research said, adding that the LNG market remains advantageous, although high demand would lead to dry-docking delays and causing tight competition worldwide.
Meanwhile, CGS-CIMB Securities Sdn Bhd said estimated that MISC may be able to deliver 20 per cent core net profit growth from the FY21 base.
It noted that MISC said its kitchen-sinking exercise at its subsidiary, Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) for expected loss-making heavy engineering projects was completed last year, and losses should shrink this year.
“If Malaysia’s international borders open to quarantine-free entry for fully-vaccinated travellers by mid-2022F, MMHE’s ship repair business may improve. The delivery of five shuttle tankers in the first half of 2022 and one in the second half of 2022 may boost AET’s profits, while a tanker freight rate recovery may be possible in 2022,” the brokerage firm said. - Bernama