MISC may not see turn­around in near term, says TA Se­cu­ri­ties

New Straits Times - - Business -

KUALA LUMPUR: TA Se­cu­ri­ties is pes­simistic about MISC Bhd due to earn­ings weak­ness un­der­pinned by char­ter rates at mul­ti­year lows across all fleet seg­ments.

The re­search house does not ex­pect a turn­around in the near term due to pro­longed ves­sel over­sup­ply, cou­pled with tepid de­mand.

In its lat­est note to in­vestors, TA Se­cu­ri­ties raised MISC’s tar­get price to RM7.65 from RM7.08 and main­tained a “sell” call. Its fair val­u­a­tion of MISC is based on 14 times of MISC’s price to fore­cast earn­ings ra­tio.

This year, liq­ue­fied nat­u­ral gas (LNG) new­builds de­liv­ery are ex­pected to peak at 44 ves­sels be­fore ta­per­ing off to 41 units next year and 22 units in 2019.

TA Se­cu­ri­ties said LNG de­mand growth was pro­jected to be sub­dued at 11 per cent, while MISC’s cur­rent or­der book-tofleet ra­tio re­mained es­ca­lated at 24 per cent.

It noted that MISC’s earn­ings would be dragged down by a de­pleted or­der book at the heavy en­gi­neer­ing seg­ment.

“We do not ex­pect a V-shaped re­cov­ery of the cap­i­tal ex­pen­di­ture down cy­cle for off­shore floaters. A grad­ual rev­er­sal, on the back of sub­dued oil price, im­plies sus­tained mar­gin pres­sure and losses,” it said.

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