THE BUZZ
After two weeks of delays, the Canadian government announced that they have blocked Petronas' bid to acquire Progress Energy Ltd under the basis that the acquisition will not benefit Canada. Petronas has 30 days to appeal or provide additional concessions, upon which the government will make a final decision.
OUR TAKE
Not giving up. According to media reports, Petronas will appeal the ruling and Progress Energy will do whatever it can to see transaction through. The latter’s chief executive officer Michael Culbert believes that the transaction is of net benefit to Canada, and the company will continue to work with the federal government to prove that point.
Still-promising prospects in the shale gas industry. The move by the Canadian Government to block the deal came as a surprise, as we had hoped that it would help MISC play a key role in transporting LNG, thereby elevating its earnings over the longer term. However, Petronas will still be involved in the development of shale gas after closing a deal with Progress Energy in Aug 2011 to develop Montney assets, which will see the two companies working together to potentially develop a liquefied natural gas export project for the west coast.
Maintain BUY. We maintain our BUY call on MISC with our FV unchanged at RM6.58, premised on a 1.3x FY13 P/B. The company is poised to see an earnings turnaround following the exit of the liner division and we think its stock price has hit its bottom. It is
currently trading at an attractive 0.9x P/B vs. its long term average of 2x since the past 10 years. Although its P/B has rerated to 1.5x since 2008, the stock is still trading below its one-year average of 1.1x. Currently MISC trades at below a -2 standard deviation since 2008.
Source: OSK
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