Monday, 22 October 2012

MISC - Unfazed by Buyout Hiccup

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

No comments:

Post a Comment