Minimal earnings impact from MISC’s terminal disposal
KUCHING: The disposal of MISC Bhd’s (MISC) tank terminal business is expected to have minimal or insignificant impact to the group’s earnings.
In a filing on Bursa Malaysia, MISC’s board of directors announce that the company had on September 25, 2017, entered into a share purchase agreement (SPA) with Dialog Group Bhd (Dialog) for the disposal of the 45 per cent equity interest held by MISC in Centralised Terminals Sdn Bhd (CTSB). The total proceeds from the proposed disposal is RM193 million.
“The proposed disposal is in line with MISC’s initiative to divest MISC’s non-core tank terminal business, unlock the value of MISC’s investment in CTSB and to focus on its core business in the energy related maritime solutions and services,” the group said.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) did not expect the disposal to significantly impact MISC’s earnings, as the disposal consideration of RM193 million represents less than 0.4 per cent of the group’’s total assets.
In fact, MIDF Research noted that earnings contribution from the segment had not been meaningful to MISC which derives the bulk of the group’s earnings from its core liquefied natural gas (LNG), petroleum, offshore and heavy engineering businesses.
Given MISC’s huge earnings and asset base, AmInvestment Bank Bhd (AmInvestment Bank) also did not expect any significant impact to MISC’s financial year 2017-2019 forecast (FY17F-FY19F) earnings per share (EPS) from the sale of an effective 36 per cent equity stake in the group’s Tanjung Langsat tank terminals in Johor to Dialog.
Am Investment Bank thus maintained its ‘ hold’ recommendation on MISC with unchanged forecasts and fair value of RM7.35 per share, which was at a 20 per cent discount to the research firm’s sum-of-parts valuation of RM9.19 per share.
MIDF Research also maintained its ‘neutral’ rating with a target price of RM7.43 per share.
The research arm’s target price was pegged to a 0.9-fold priceto-book which was -1.5 standard deviations below MISC’s five-year average amid the challenging overcapacity environment.
“Factors that could prompt us to revise our call on MISC include a change in supplydemand dynamics in the LNG and petroleum transportation market and the securing of sizable projects in the offshore segment,” it said.