MISC: Maritime Player Secures Landmark LCO2 Charter, Valuation Prompts Rating Downgrade

Strategic Market Entry

A major maritime group has announced its strategic entry into the carbon capture and storage (CCS) shipping sector, securing a significant long-term time charter for newbuild liquefied carbon dioxide (LCO2) carriers. This move marks the group’s first commercial foray into LCO2 transportation, positioning it within a niche segment with high barriers to entry and substantial long-term structural growth potential.

Contract Details and Scope

The consortium, in partnership with a leading Japanese shipping company, has secured a 10-year firm time charter with Northern Lights JV DA for one 12,000 cubic meter newbuild LCO2 carrier, with a second sister vessel anticipated to be awarded in April 2026. These vessels, scheduled for delivery between the second half of 2028 and the first half of 2029, are set to support Phase 2 of Norway’s Northern Lights carbon capture and storage project, facilitating cross-border CO2 transportation for permanent offshore storage in Norway. A 50:50 joint venture will be established to jointly own and charter these specialized vessels.

Analyst Perspective and Strategic Significance

Analysts view this development as strategically positive, highlighting several key benefits. The charter is backed by blue-chip counterparties including Equinor, TotalEnergies, and Shell, which significantly mitigates counterparty risk. Furthermore, CCS shipping offers utility-like, long-term contracted cash flows, providing limited exposure to volatile spot market conditions. This contract also reinforces the group’s standing as a transition-enabling maritime solutions provider, potentially opening doors for future CCS-related shipping tenders across Europe and Asia.

Earnings Impact and Outlook

Despite the strategic significance, analysts caution that this contract alone is not expected to materially impact near-term earnings, given that vessel deliveries are not slated until FY29 onwards. Consequently, current earnings forecasts remain unchanged pending further details from upcoming analyst briefings. The investment bank noted that there is no change to earnings forecasts at this stage.

Valuation and Recommendation

Based on its valuation, with a target price pegged at RM8.40 per share, derived from 16.5 times CY25 EPS, the investment bank has downgraded its recommendation from “BUY” to “HOLD”. This adjustment reflects the limited upside to the current valuation, despite the positive long-term strategic outlook.