MISC: Shipping Conglomerate Navigates Mixed Waters, Core Profit Meets Forecasts

The company recorded a core net profit of RM1.3 billion for 1HFY25, which was in line with both TA Securities’ and consensus expectations, accounting for 61% and 56% of their respective full-year forecasts. This “in-line” assessment is tempered by an anticipation of softer earnings in the coming quarters, primarily influenced by continued weakness in LNG and crude tanker spot rates. An interim dividend of 8 sen per share was also declared.

Segmental Performance Overview

A detailed look at the company’s segments revealed varied performances. The Gas Assets segment experienced a 23.8% year-on-year (YoY) decline in revenue, attributed to lower earning days resulting from contract expiries, vessel disposals, and reduced charter rates. This led to a 3.9% YoY fall in PBT for the segment.

The Petroleum segment also saw its revenue decrease by 1.7% YoY, primarily due to the adverse impact of the strengthening Ringgit on foreign exchange. This contributed to a significant 25.1% YoY drop in PBT, largely due to lower margins from charter contracts.

In contrast, the Offshore segment delivered robust growth, with revenue increasing by 5.3% YoY. This was primarily driven by the recognition of revenue following the acquisition of a Floating Production Storage and Offloading (FPSO) unit. The transition of this FPSO from the construction phase to operational status propelled the segment’s PBT from RM73.2 million to RM227.5 million.

The Marine and Heavy Engineering (MHB) segment faced substantial headwinds, reporting a 52.0% YoY decrease in revenue. This decline was mainly due to ongoing Heavy Engineering projects nearing completion, resulting in reduced activity and revenue generation. Consequently, PBT for this segment plummeted by 83.9% YoY, from RM79.1 million to RM12.7 million.

Future Outlook and Investment View

TA Securities has maintained its earnings forecasts, indicating no changes to the company’s projected financial performance.

The outlook for Gas Assets is expected to remain soft in 2H25, stemming from weak LNG spot rates, high vessel availability due to newbuild deliveries, and potential delays in additional supply from new LNG liquefaction projects. The Petroleum segment faces continued subdued crude tanker spot rates, influenced by softer oil demand, particularly from China, and ongoing OPEC+ output curbs. Despite these challenges, the overall tanker market outlook remains positive, buoyed by high tonne-mile demand from continuous vessel rerouting and minimal fleet expansion.

The Offshore segment is poised for continued growth, with S&P Global projecting offshore CAPEX to steadily rise to USD21 billion by 2029. FPSO demand is expected to remain strong through 2028, particularly in South America and Asia-Pacific. MHB’s secured order book currently stands at RM5.2 billion, providing operational visibility through 2028, and the company aims to increase its Heavy Engineering tender book to approximately RM11 billion, presenting significant future opportunities.

TA Securities reiterates a “BUY” recommendation for the company, maintaining its target price at RM8.40 per share. This valuation is pegged to 16.5x CY25 EPS and includes an ESG Premium of 5%.