PETALING JAYA: MISC Bhd will book extraordinary gains in the second half of this year via the listing of the assets of Netherlands-based VTTI B.V. – a global tank terminal company in which MISC has equity – in the United States and from the disposal of MISC Integrated Logistics Sdn Bhd (MILS).
MISC bought a 50% stake in VTTI for US$735mil (RM2.36bil) in late 2010.
In Malaysia, MISC and VTTI equally own VTTI’s ATT Tanjung Bin (ATB), an oil terminal near Port of Tanjung Pelepas in Johor.
VTTI, with global assets worth more than US$1.1bil, is also jointly owned by the Netherlands-based Vitol Group, one of the largest independent energy trading companies in the world.
VTTI owns and operates terminals, storage tanks and pipelines in 14 countries on five continents with a total capacity of 8.6 million cu m.
Hong Leong Investment Bank analyst Daniel Wong said that VTTI planned to restructure and put some parts of its assets under one entity to be listed in the United States in the second half of the year.
“But the listing details are sketchy for now to determine how much MISC would be raking in from the listing,” he said.
In his report on MISC, Wong said that only parts of the assets owned by VTTI would be listed.
“The cash proceeds will be distributed back to MISC and Vitol.
“MISC is also expecting to recognise gains of RM50mil from the disposal of MILS by the third quarter of this year,” Wong said.
Maybank IB Research, meanwhile, said that stemming from VTTI’s restructuring, associate earnings for MISC were expected to fall as its equity stake may be diluted after the listing exercise.
MISC recently posted a better-than-expected first quarter ended March 31 results, achieving a 62% year-on-year (y-o-y) jump in net profit to RM486.4mil.
However, the shipping giant is still sailing in stormy weather despite a seasonal improvement in petroleum tankers charter rates.
Maybank IB Research said the improved y-o-y results were driven largely by MISC’s petroleum tanker division returning to profitability coupled with higher profits from its LNG (liquefied natural gas) shipping and other offshore divisions.
“This more than compensated for the lower profit at the heavy engineering and tank terminal operations, and higher losses at the chemical division,” said Maybank IB.
Going forward, Hong Leong Investment expects MISC to be hit by impairment charges in the second half of this year on five of its “Puteri Class” LNG tankers, whose long-term contracts are due end in stages starting from the third quarter of this year until 2017.
However, Wong said the vessels had the potential of securing contract extensions.
“MISC is actively tendering for LNG shipping projects outside Malaysia. However, charter rates could potentially be lower due to the oversupply of LNG tanker situation,” Wong said.
Hong Leong Investment also pointed out that an improvement in petroleum tanker rates in the first quarter of this year was only seasonal.
“Post the seasonal strong rebound, charter rates have trended down in March, which will dampen petroleum shipping earnings.
“MISC has guided for potential losses from its petroleum business for the remaining year. However, management expects average charter rates to be stronger this year and next year compared with 2013,” it said.
MISC has been trimming down its non-profitable businesses to concentrate on energy shipping, offshore operations and heavy engineering.
So far, it had hived off its container shipping and logistics businesses.
MISC shares have strengthened to RM6.45 as of May 12 from a low of RM3.87 on June 5, 2012.
Meanwhile, CIMB Research said MISC needed a new strategic vision for long-term growth, considering that it only had orders for two new vessels currently and the uncertainty surrounding its bids for new LNG contracts.
– The Star
