Any successful project win in FPSO market will be ‘huge positive’ for MISC
KUALA LUMPUR: Any successful project win in the floating, production, storage and offloading (FPSO) market will be a ‘huge positive’ for MISC Bhd (MISC), analysts project in a company update.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), MISC has increased the group’s efforts in tapping into the global FPSO market, identifying it as a key growth market for the group moving forward.
“We gathered that the company is preparing to submit a bid for a mega FPSO project in Brazil by the end of the year, with a capital expenditure (capex) of approximately US$2 billion.
“Nonetheless, we believe the company could be open to equity-stake partnership should it win the project,” the research arm said.
Meanwhile, Kenanga Research also gathered the company had also submitted bids in partnership with Yinson Holdings Bhd for the Limbayong FPSO project by Petroliam Nasional Bhd (Petronas), with a guesstimate capex of approximately US$700 million.
“Overall, despite the relatively limited experience MISC has in the large-size FPSO market, we believe any successful project win from this space would be a huge positive for the company.”
Moving forward over the longer-term, Kenanga Research believed the company is strategically limiting its fleet size for tanker vessels while also taking concerted efforts to shift its portfolio more towards term charters, thereby limiting exposure to the fluctuations of the spot market.
The research arm recapped that currently, MISC’s portfolio of petroleum shipping tankers (fleet of 78 vessels) stand at 65 per cent term charters, and 35 per cent spot charters.
“MISC has scheduled seven shuttle tankers for delivery in the coming months, which we believe these would serve longerterm time charters, for example seven to 15 years, reflecting the company’s on-going strategy of pivoting towards term rather than spot charters.”
As for the shorter term, Kenanga Research believed the low earnings base seen in financial year 2018 (FY18A) could help set the scene for earnings rebound over the next one to two years.
The research arm pointed out that spot tanker rates during the recent winter were noticeably much stronger after some rebalancing following high scrapping activities in 2018.