Robust balance sheet drives MISC prospects

PETALING JAYA: MISC Bhd is expected to maintain its earnings momentum, underpinned by resilient petroleum shipping rates, growing offshore activity and a strong balance sheet, although crude tanker rates are likely to normalise in the second half of financial year 2026 (2H26).

Hong Leong Investment Bank Research (HLIB) and MBSB Research maintained “buy” calls on MISC, with both retaining a target price of RM9.22.

HLIB Research raised the earnings forecasts for FY26 to FY28 by 18.1%, 6.8% and 0.7%, respectively on firmer tanker rates, while MBSB Research made no changes to its forecasts as the 1H26 performance was broadly in line with expectations.

HLIB Research said MISC remains relatively insulated from geopolitical tensions because of its defensive business model, anchored by long-term liquefied natural gas (LNG) and petroleum charters that provide recurring cash flows and support consistent dividend payouts.

However, it cautioned that crude tanker rates have since returned to pre-war levels, which is likely to result in earnings normalisation in 2H26.

The group delivered a strong second quarter, with HLIB Research reporting core net profit of RM1.03bil, up 61.2% quarter-on-quarter and 83.2% year-on-year (y-o-y).

This lifted 1H26 core net profit to RM1.67bil, representing 27% growth y-o-y and putting the company ahead of both its and consensus’ expectations.

The key earnings driver was petroleum and product shipping, where 1H26 revenue rose 48% to RM3.76bil while operating profit jumped 92.3% to RM1.29bil, supported by higher freight rates and earning days.

HLIB Research noted that Very Large Crude Carrier and Aframax rates doubled, while Suezmax rates tripled during March and April amid the US-Iran conflict.

It expects global tanker supply to remain relatively tight in 2H26 despite moderating spot rates. While crude tanker fleet capacity is projected to expand by about 2% annually through 2031, substantial vessel deliveries are only expected from late 2027.

This gives MISC an opportunity to lock in uncommitted vessels on lucrative term charters, while its eco-designed dual-fuel tankers could command a premium amid tighter environmental regulations.

Offshore is another longer-term growth pillar. MBSB Research expects global upstream capital expenditure to reach US$200bil by 2030, with 30 floating production storage and offloading awards forecast for 2027 to 2029.

Extensions secured for MISC’s brownfield floaters should support asset utilisation and recurring cash flows.

Meanwhile, marine and heavy engineering is gaining traction as projects move into higher construction phases.

Its 1H26 revenue rose 70.5% to RM1.51bil, while operating profit more than doubled to RM85.9mil.

LNG remains the weaker segment in the near term, with 1H26 revenue falling 30.1% due to lower charter rates, fewer earning days and the absence of construction revenue.

Nevertheless, MBSB Research said the segment’s long-term charter structure should insulate earnings from short-term spot market weakness.

An analyst told StarBiz he expects MISC’s gas asset segment to continue providing relatively stable earnings visibility.

“This is underpinned by its long-term charter portfolio and an expanding fleet of modern, fuel-efficient LNG carriers.

“While near-term earnings are likely to remain affected by lower earning days and the phase-out of older steam-turbine vessels, progressive fleet renewal should improve the segment’s long-term earnings resilience, cost competitiveness and operational efficiency,” he said.

MBSB Research highlighted MISC’s improving net gearing, which fell from 0.20 times to 0.16 times as of June 2026.

It said the stronger balance sheet provides room to fund vessel deliveries.