Two thumbs up for MISC’s new contracts
KUCHING: MISC Bhd (MISC), through a consortium with Nippon Yusen Kabushiki Kaisha (NYK), Kawasaki Kisen Kaisha Ltd (K-Line), and China LNG Shipping (Holdings) Ltd (CLNG), has been awarded long-term time charter contracts by QatarEnergy for seven newbuild liquefied natural gas (LNG) carriers.
The vessels, which will be built by Hyundai Heavy Industries, are expected to commence operations by 2025.
Analysts with RHB Investment Bank Bhd (RHB Research) are positive on the contract wins as it will expand MISC’s current LNG fleet size of 30 and provide recurring income in the long term, although the actual number of seven vessels is lower than the 12 previously reported.
“The consortium partners are established Asian shipping companies,” it said in its analysis. “The seven vessels will have a capacity of 174,000 cubic metres (cmb) each, similar to the two LNG carriers chartered for Exxon Mobil Corp, but larger than its existing Seri C class vessels (150,200 cbm).
“The vessels will be equipped with eco-efficient technologies such as XDF 2.1 engines with Intelligent Control by Exhaust Recycling (iCER) and Air Lubrication systems, which will reduce greenhouse gas (GHG) emissions.”
While there is limited disclosure on the contract details, RHB Research estimate the daily charter rate to be in the range of US$80,000 to US$90,000 per day, which is lower than the average threeyear time charter of more than US$100,000 per day in July.
It saw that such rates were also higher than Exxon Mobil’s implied charter rate of circa US$65,000 per day, as the cost of building a new vessel has escalated by 40 per cent to as high as US$236 million in July.
“As we are guided that the firm tenure is kept below 20 years, it is likely to be in the range of 10 to 15 years.
“As MISC’s balance sheet is solid, with net gearing at 0.28 times in 1Q22, we believe it is capable of funding the equity portion of net capex, estimated at US$120 milion, assuming 70 per cent debt financing.”
Kenanga Investment Bank Bhd (Kenanga Research) was also mildly positive on the contract win, seeing it as a continued replenishment of the group’s LNG fleet.
“We made no changes to our FY22 and FY23 numbers, given the contract’s 2025 commencement date and its smallish immediate earnings impact,” it said in its own notes.
“Looking ahead, we expect the upcoming 2QFY22 reported earnings to be weaker, as we anticipate the group to recognise impairments and provisions following the continued delays and cost escalations for its Mero-3 FPSO, currently undergoing conversion and fabrication works at CIMC Raffles shipyard in China.”