MISC to have stronger 2H, weaker earnings outlook for FY18-19
KUCHING: MISC Bhd (MISC) has been projected by analysts to have a stronger second half of financial year 2018 (2HFY18) but there are also forecasts that the group will have weaker earnings for FY18-19.
In its company report on MISC, AmInvestment Bank Bhd (AmInvestment Bank) projected a stronger 2HFY18 from the group as tanker rates are seasonally improving towards the year-end winter amid easing the Organization of the Petroleum Exporting Countries (OPEC) production quotas.
“We estimate that MISC’s FY18F earnings could rise by eight per cent from a 10 per cent increase in spot tanker rates,” the research firm said.
In contrast, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) expected weaker earnings outlook for FY1819 for the group.
This was due to continuingly suppressed charter rates given oversupply in the market, in which Kenanga Research saw no
catalysts yet for a sustainable recovery.
“Newbuild deliveries are expected to remain strong for liquefied natural gas (LNG) vessels, while accelerated scrapping activity for tankers of late is still largely saddled by the high number of deliveries seen over the past two years,” it said.
As for the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), it projected a challenging outlook for MISC’s heavy engineering segment.
“Despite crude oil prices and the overall operating climate improving, FY18 will continue to be a challenging year for the heavy engineering segment.
“This is predominantly due to the timing differences in revenue and profit recognition between tail-end projects and new projects,” MIDF Research said.
The research arm noted that the large portion of MISC’s orderbook consists of the RM1 billion Bokor CPP job which will only undergo the first steel cut in the third quarter of FY18 (3QFY18) - the large portion of works will happen only in FY19.
“Overall segment contribution is less than 10 per cent of total group profit.”