News MISC announced that a takeover bid had been initiated
by one of its major shareholders, Petronas (which has a current shareholding of
62.67%) for the remaining 37.3% shareholding in MISC that it (Petronas) does
not own at an offer price of RM5.30/share.
Comments We
are pleasantly surprised by the takeover bid, as this had not been known by the
market.
In our opinion, the move by Petronas could imply that there
is a need for a further internal restructuring by MISC.
The RM5.30/share
price tag works out to a P/BV of 1.16x (BV/share as at 3QFY12 was
RM4.54/share), which is below the company’s historical average P/BV traded of
1.6x.
However, we deem the
pricing as fair given that it is: 1) at a premium of 19% above the last closing price of RM4.45; 2) at a premium of 15% above
our target price of RM4.61; and 3) at a premium of 3.1% above the consensus’
target price of RM5.14.
Outlook We
still believe that there will be tough times for the shipping industry,
especially for the Petroleum and Chemical segments which continue to be stumped
by: 1) volatile charter rates versus unyielding bunker costs; and 2) the
imbalance in the demand and supply of vessels.
This has been
evidenced by MISC’s weak historical earnings and is also likely to undermine
any significant near-term prospects for the stock.
Forecast There
are no changes to our earnings estimates.
Rating Accept
Offer
Valuation Reverting to target price of RM5.30 based on
offer price by Petronas.
Previously, our
SOP-based target price of RM4.61 excludes the value of the assets of its
Petroleum and Chemical Shipping division as we expect the division to remain
loss-making in the near future.
Risks 1)
Lower charter rates and 2) a higher bunker cost.
Source: Kenanga
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