MISC’s offshore division poised for stronger performance

PETALING JAYA: MISC Bhd’s outlook is expected to remain positive, underpinned by its stable operating cash flow and robust balance sheet.

These are expected to position the group well to capitalise on growth opportunities in the floating production storage and offloading (FPSO) market.

RHB Research said MISC’s first quarter of financial year 2025 (1Q25) results were broadly in line with its expectations, as the research house foresees some softness in the gas and petroleum segments in the coming quarters due to ongoing market uncertainties.

“Core profit, excluding items such as impairment provisions, loss on modification of a finance lease contract, gain on acquisition of subsidiaries, and a one-off gain from the commencement of a new FPSO lease, increased 32.7% quarter-on-quarter (q-o-q).

“This was primarily driven by stronger contributions from the offshore segment following the start-up of Mero 3,” the research house said in a report yesterday.

Nonetheless, RHB Research said slightly offsetting the group’s year-on-year (y-o-y) gain was the weaker gas performance due to lower earning days from contract expiries, vessel disposals, and lower charter rates.

The research house said MISC’s offshore segment is poised for stronger performance following first oil delivery from Mero 3, which is expected to generate steady long-term cash flows for the group.

For vessel deliveries, the company anticipates four, 12, and three new liquefied natural gas (LNG) carriers in the financial year 2025 (FY25), FY26, and FY27.

“Other deliveries include one floating storage unit in FY25, two Aframaxes in FY27 and two Very Large Ethane Carriers or VLECs in FY28. The term-to-spot ratio is at 82:18 for both the gas and petroleum divisions.

“Management guided that LNG shipping rates are expected to stay subdued due to vessel oversupply, driven by high newbuild deliveries and delays in LNG liquefaction projects,” RHB Research said.

The research house noted that the petroleum outlook is mixed with VLEC rates forecasted to slightly outperform mid-sized tankers, supported by stagnant fleet growth and sustained long-haul crude demand from the Americas and Middle East to Asia.

“Mid-sized tanker rates are expected to ease, in MISCs view, amid increased vessel availability, normalising from the strong levels seen in 2023 and early 2024,” RHB Research said.

RHB Research maintained its earnings estimates for MISC, calling a “buy” on the stock with a target price of RM9.70.

Meanwhile, CIMB Research said while it maintains its FY25 to FY27 earnings forecasts, it anticipates lower earnings from 2Q25 onwards in the absence of the one-off gain from FPSO Bunga Kertas.

“Nevertheless, the FY25 to FY27 earnings outlook remains supported by the full-year contribution from FPSO Marechal Duque de Caxias, which we estimate will contribute approximately RM105.5mil, RM122.6mil, and RM140.4mil in FY25, FY26, and FY27, respectively, in core net profit – accounting for about 4.7% to 5.2% of projected group core net profit,” the research house said.