MISC: Segmental Strengths Support Earnings Amid Operational Shifts

Investment bank TA Securities reported that the company’s core net profit for FY25, recorded at RM2,206.3 million, broadly aligned with the bank’s own forecasts but fell slightly below market consensus expectations. This performance accounted for 102% of TA Securities’ full-year forecast and 94% of the broader consensus. In recognition of the period’s performance, an interim dividend of 14 sen per share was also declared.

Performance Review

The financial year presented a mixed yet resilient performance across key operational segments. The Petroleum segment demonstrated notable growth, with 4QFY25 revenue increasing by 11.3% year-on-year, primarily attributed to stronger freight rates and an increase in earning days. This positive momentum also translated into an 11.3% year-on-year rise in its Profit Before Tax (PBT).

Similarly, the Offshore segment recorded a 16.1% year-on-year growth in 4QFY25 revenue. This increase was largely driven by revenue recognition from an acquired Floating Production Storage and Offloading (FPSO) unit, which transitioned from its construction phase to full operational status. The PBT for this segment surged significantly to RM177.9 million, recovering from a Loss Before Tax (LBT) of RM135.1 million in the previous year, further bolstered by the FPSO’s operational transition and a recovery from an FSO insurance claim.

Even amid challenging market conditions, the Marine and Heavy Engineering segment improved its PBT by a substantial 107.1% year-on-year. This was primarily due to favorable close-out outcomes of completed projects, despite a 28.8% year-on-year decline in 4QFY25 revenue as several projects neared completion and newly secured projects were still in early stages.

Operational Headwinds

Conversely, the Gas Assets segment faced significant operational headwinds during 4QFY25, experiencing a 50.9% year-on-year decline in revenue. This downturn was mainly a result of lower earning days due to contract expiries, vessel disposals, vessels being laid-up, and reduced charter rates. Consequently, the segment’s PBT dropped dramatically by 99.7% year-on-year, falling from RM179.7 million to RM0.5 million.

Future Outlook

Looking forward, the outlook for the Petroleum segment in 2026 remains broadly positive. This is underpinned by resilient tonne-mile demand, shifts in global oil trade patterns, and increased OPEC+ production. Charter rates are expected to remain firm despite new tonnage deliveries, with the segment focusing on expanding its contract portfolio and optimizing fleet deployment through more efficient trade routes.

The Offshore market is anticipated to remain robust, supported by a favorable industry outlook driven by firm global energy demand and continued investment in upstream exploration and production, particularly in deepwater developments and FPSO activities in South America and the Asia-Pacific regions. The segment aims to pursue strategic growth initiatives in high-potential markets to strengthen long-term value.

The Marine and Heavy Engineering segment anticipates a volatile operating environment due to geopolitical and tariff uncertainties. The Heavy Engineering sub-segment will prioritize execution excellence and strengthening its orderbook across conventional and new energy projects while maintaining operational discipline. The Marine sub-segment is expected to deliver steady performance, supported by vessel repair and conversion activities and continued enhancements in operational efficiency and project delivery.

For Gas Assets, LNG carrier charter rates are expected to gradually improve in 2026 as rising global liquefaction capacity rebalances the market. However, steam turbine vessel rates are likely to remain subdued due to a preference for modern ships. The segment will continue to focus on long-term charters, fleet rejuvenation with eco-efficient LNGCs, and cost optimization measures including lay-ups and redeployment of off-charter vessels.

Analyst Recommendation

TA Securities has maintained its HOLD recommendation on the stock, with an unchanged target price of RM8.40 per share. This target price is pegged to 16.5x CY26 EPS and incorporates a 5% ESG Premium.