MISC sails to record high after Qatar LNG contract wins

 

RHB Research said MISC may have to fork out around US$265 million or RM1.26 billion to build a new LNG carrier. (MISC pic)

PETALING JAYA: MISC Bhd hit a new high today after announcing it had secured long-term contracts for three liquefied natural gas (LNG) carriers from state-owned QatarEnergy.

MISC, one of the world’s leading operators of energy shipping vessels, rose as much as 27 sen or 3.5% to a new high of RM7.93 in morning trading.

However, it pared its gains by the close, edging up 7 sen or 0.9% to RM7.73, valuing the group at RM34.5 billion. A total of 4.24 million shares changed hands.

In a bourse filing yesterday, MISC said the contracts are for time charter of three newbuild LNG carriers to be built by Samsung Heavy Industries Co Ltd. The LNG carriers will be chartered by QatarEnergy for 15 years from 2026 onwards, it added. No financial details were provided.

Analysts said the contract awards point to rising demand for LNG carriers as Qatar prepares to ramp natural gas output. QatarEnergy kicked off the second phase of its LNG ship acquisition programme in September 2023 to support expansions in the North Field in Qatar and Golden Pass in the US.

Research houses are positive on MISC’s latest contract wins. TA Securities has a “buy” call and a target price (TP) of RM8.30 on MISC, a subsidiary of national oil corporation Petroliam Nasional Bhd (Petronas).

“We view this positively as this replaces some of MISC’s expiring time charter contracts with new ones.

“QatarEnergy has been aggressively expanding its fleet size, contracting a total of 104 LNG ships in two phases amid its push to position itself as the world’s top LNG exporter,” the research house said in a note today.

It noted that MISC, through a consortium with three other partners, had previously secured long-term contracts for 12 newbuild LNG carriers under QatarEnergy’s Phase 1 shipbuilding programme with delivery expected from 2025 onwards.

Given MISC’s 25% equity stake in the consortium, this effectively translates to three LNG carriers for MISC, it added. The other consortium partners are Nippon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha and China LNG Shipping.

TA estimates the capital expenditure (capex) per newbuild vessel at around US$200 million to US$220 million (RM950.63 million to RM1.05 billion) and a daily charter rate (DCR) of US$70,000-US$90,000 (RM332,793-RM427,876), translating into a high single-digit to low double-digit internal rate of return (IRR).

“We believe that these contracts are insufficient to completely replace the expiring long-term contracts, where we estimate the DCR to be above US$100,000 (RM475,442),” it added.

Nevertheless, TA said MISC is well positioned to benefit from increasing demand for LNG shipping and is the top contender for future floating production storage and offloading (FPSO) projects.

‘Unexciting IRR’

Meanwhile, RHB Research is “generally positive” on MISC’s three new LNG carrier charter contracts, which should increase its recurring income base. It maintained its “buy” call with a TP of RM8.94.

“However, we think it has to lock in much stronger charter rates than the current spot rates to fetch decent project returns, given the elevated asset prices.

“While there is limited disclosure on the contract, we note that the project’s IRR could be rather unexciting, as asset prices are now more expensive compared to MISC’s previous contract win,” it said, adding the cost of building a new vessel is now around US$265 million or RM1.26 billion, a 14% rise from the average cost in 2022.

“Assuming that capex is locked in at US$260 million, we estimate that the daily charter rate would need to be at US$90,000-US$110,000/day to fetch a project IRR of 7%-10%,” RHB said, noting that spot charter rates fell below US$50,000/day at end-March.

MISC’s fleet consists of more than 100 owned and in-chartered vessels with a combined deadweight tonnage capacity of over 13 million tonnes, according to its website. Apart from energy shipping, it is also involved in offshore floating solutions, marine repair and conversion, integrated marine services, port management and maritime services.

Interestingly, the company was founded in 1968 by tycoon Robert Kuok, Malaysia’s richest individual, at the request of the Malaysian government. Kuok, who had no experience in the business, sought the help of Hong Kong shipping magnate Frank Tsao to establish the business.

Then known as Malaysia International Shipping Corporation, it was renamed MISC Bhd in 2005. By then, Kuok had already sold off his stake in the group. - FMT