MISC to bid for up to RM11.8bil tenders

PETALING JAYA: MISC Bhd is bidding for US$2bil to US$3bil (RM7.9bil to RM11.86bil) worth of tenders, principally focused on the offshore and shuttle tanker business.

According to a report by CIMB Research, MISC is bidding for smaller floating production storage and offloading (FPSO) projects in the Asia-Pacific region, where it expects to secure a small US$200mil to US$300mil (RM790.4mil to RM1.19bil) capex project soon, as well as larger FPSO projects in the Atlantic Basin of Brazil and West Africa.

“MISC already has a fleet of four shuttle tankers with two more to be delivered and it is interested to grow in this business due to lucrative margins.

“However, with the last of its five liquefied natural gas (LNG) new buildings already delivered on April 30, 2018, there may not be much growth left in this division.

“As for the AET tanker fleet, three more aframaxes (medium-sized crude tankers) should be delivered over the next 12 months but earnings prospects could be in for a tough time if renewed US sanctions on Iran crimp its oil exports,” said CIMB Research.

MISC reported a net profit of RM310.6mil for the first quarter, which was below expectations, meeting only 17% and 15% of UOB Kay Hian and consensus forecasts respectively.

Although UOB Kay Hian expected the impact from weaker US dollar and petroleum losses, the losses were greater than perceived, due to softer offshore earnings and lower joint venture (JV) income.

Offshore income was lower as the construction of FSP Benchamas was at the tail end, while the JV recorded another negative surprise, which reflects the full impact of the removal of tank terminals sold to Dialog, as well as adjustment in lower finance lease income for Kikeh.

The research house cuts 2018 to 2020 earnings forecasts by 16%, 10% and 8%.

“We slashed our assumptions for petroleum to report small losses in 2018 despite anticipating a better second half, lower JV income by 50%, and cut offshore income by 10%.

“As compared to the group’s earlier guidance to maintain flattish US dollar earnings, we now expect a US dollar earnings decline in 2018 before picking up in 2019 to be similar to 2017’s base,” said UOB Kay Hian in a report.

The research house added that MISC is confident that despite the business challenges, facing a decline in Ebitda and a yearly capex commitment of US$1bil (RM3.95bil) for vessel upgrades and new contract wins, the group guides that it is able to generate sufficient cash flow to fund its capex commitments and quarterly dividends.