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