MISC’s 3QFY12 core earnings tumbled 63% y-o-y and 74% q-o-q, dragged down by provisions for FSPO Cendor in the heavy engineering unit and lower earnings from the petroleum tanker shipping unit. Nonetheless, we deem its earnings in line, making up 68% of our full-year forecast although missing consensus estimates. Management guided that 4Q will see better profits due to seasonally higher shipping demand during the winter. We expect its exit from the loss-making liner business to translate into stronger FY13 earnings, which we project to surge by 71%. Maintain BUY, at RM6.58 FV.
Within. MISC’s 3QFY12 core earnings sank 63% y-o-y and 74% q-o-q due to the massive 91% and 50% y-o-y drops in PBT from Malaysia Marine Heavy Engineering (MMHE) and petroleum shipping. For 9MFY12, the group’s core net profit fell 30% to USD152m, making up only 68% of our full-year estimates but 64% of consensus’ forecast. 4Q is typically a seasonally stronger quarter for MISC as the petroleum and LNG segment experiences heightened shipment activities due to the winter.
Hit by MMHE, petroleum. The substantial drop in MMHE’s earnings was due to hefty provisions made for FPSO Cendor while the petroleum segment saw revenue weaken by 12% y-o-y due to lower shipping rates coupled with high bunkering costs, which were up by 7% y-o-y. In addition, PBT from the LNG unit also weakened by 13% y-o-y as a result of higher dry docking activities although this was offset by a 1-month contribution from the two FSUs (Floating storage unit) for the Melaka re-gasification plant amounting to USD4m-USD5m. As the provisions for FPSO Cendor relates to costs, we have not included this into our computation for the exceptional items as the numbers were not disclosed. For 3QFY12, exceptional items totalled a net gain of USD17m, largely due to unrealized forex translation gains of USD21m, a USD2.7m write-back on liner vessels which were offset by a USD7m impairment on vessels.
4Q to be commendable. Management guided that 4Q will see better profits in view of the absence of provisions from MMHE and seasonally stronger shipping demand due to the winter season. Key highlights from the analyst briefing yesterday: i) the outlook on the petroleum and chemical shipping space will continue to be challenging, ii) the Gumusut Kakap FPSO (floating production, storage and offloading) is expected to start contributing revenue mid next year and the completion of its proposed sale would pare down borrowings substantially, iii) delay in the commencement of the re-gasification plant will not hit earnings from its FSUs as these FSUs have been delivered for storage.
Maintain BUY. With its earnings intact, we maintain our FV at RM6.45 based on 1.3x P/B.
Within. MISC’s 3QFY12 core earnings sank 63% y-o-y and 74% q-o-q due to the massive 91% and 50% y-o-y drops in PBT from Malaysia Marine Heavy Engineering (MMHE) and petroleum shipping. For 9MFY12, the group’s core net profit fell 30% to USD152m, making up only 68% of our full-year estimates but 64% of consensus’ forecast. 4Q is typically a seasonally stronger quarter for MISC as the petroleum and LNG segment experiences heightened shipment activities due to the winter.
Hit by MMHE, petroleum. The substantial drop in MMHE’s earnings was due to hefty provisions made for FPSO Cendor while the petroleum segment saw revenue weaken by 12% y-o-y due to lower shipping rates coupled with high bunkering costs, which were up by 7% y-o-y. In addition, PBT from the LNG unit also weakened by 13% y-o-y as a result of higher dry docking activities although this was offset by a 1-month contribution from the two FSUs (Floating storage unit) for the Melaka re-gasification plant amounting to USD4m-USD5m. As the provisions for FPSO Cendor relates to costs, we have not included this into our computation for the exceptional items as the numbers were not disclosed. For 3QFY12, exceptional items totalled a net gain of USD17m, largely due to unrealized forex translation gains of USD21m, a USD2.7m write-back on liner vessels which were offset by a USD7m impairment on vessels.
4Q to be commendable. Management guided that 4Q will see better profits in view of the absence of provisions from MMHE and seasonally stronger shipping demand due to the winter season. Key highlights from the analyst briefing yesterday: i) the outlook on the petroleum and chemical shipping space will continue to be challenging, ii) the Gumusut Kakap FPSO (floating production, storage and offloading) is expected to start contributing revenue mid next year and the completion of its proposed sale would pare down borrowings substantially, iii) delay in the commencement of the re-gasification plant will not hit earnings from its FSUs as these FSUs have been delivered for storage.
Maintain BUY. With its earnings intact, we maintain our FV at RM6.45 based on 1.3x P/B.
Source: OSK
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