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Analysts mixed on MISC's LNG contract win

11/08/2022 01:59 PM

KUALA LUMPUR, Aug 11 (Bernama) -- Analysts are mixed on the MISC Bhd’s liquified natural gas (LNG) contract win as the contract will only improve MISC’s full financial year 2025 (FY25f) estimated earnings by less than three per cent on a 25 per cent stake.

Yesterday, MISC said it has been awarded long-term charter contracts for seven 174,000 cubic meters LNG carriers to be built by Hyundai Heavy Industries.

MISC will enter into a consortium with three other multinational companies (MNCs) each having an equal stake of 25 per cent for each carrier.

Hong Leong Investment Bank (HLIB) said it is only “mildly positive” about this development and is maintaining a hold on the counter with an unchanged sum of parts-derived target price of RM7.67 per share.

In a research note today, it said MISCis supported by the “defensive nature” of its name because of its portfolio of long-term charters to provide consistent, recurring cash flows and its relatively fixed dividend payout policy of 33 sen per year.

Maybank Investment Bank (Maybank IB) viewed this latest development as “neutral”, pending clarity from the company’s management.

“We maintain our earnings forecasts, a sum of parts-derived target price of RM7.53 with a hold recommendation and expects the performance of its GAS Assets and Solutions segment to sustain, supported by the stable income from its long-term charters,” it said.

Meanwhile, Kenanga Research said it is positive about the contract win although the immediate earnings impact may be smallish. 

“We expect the upcoming Q2FY22 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 floating production, storage and offloading, currently undergoing conversion and fabrication works at CIMC Raffles shipyard in China,” it said. It has a target price of RM7.55 for the counter.


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