Thursday, April 25, 2013

What's NEXT For MISC After The Failed GO ....

MISC Bhd's 800,000 shares were traded off-market at RM4.15 each on 24 April 2013.

MISC had been in focus after Petroliam Nasional Bhd launched a takeover offer for the company. However, the takeover did not get through. Market observers said many event-driven and short-term funds had recently taken positions in MISC to play the GO and did not expect these shareholders to hold on to their stakes.

Petronas would not be able to make another offer for one year from April 2013.

Dated Jan 2013 ... Prior To The General Offer.

The cessation of its liners business and sale of 50% of Gummusut-Kalap Semi-Floating

Production System Ltd to Petronas in the last 14 months could well be the last major divestures undertaken by MISC Bhd.

But questions have emerged on the future of the state run shipper’s relatively unknown integrated logistics business. With its container shipping days and liner losses now (Jan 2013) behind it, there could be a push to divest the remaining non core unit.

At some point, it is only logical to get out the remaining integrated logistics business. Previously it was part of the value chain. MISC had containers and wanted to move them, hence the use of prime movers. But there is no point in holding onto it now.

The reason they still have it could be because they are not able to find a buyer. MISC could potentially sell the business to logistics companies like Kontena Nasional or NCB Holdings Bhd.

That said, integrated logistics is a small part of MISC’s business, contributing less than 5% to the group revenue and profit.

It is not as though MISC is losing a lot of money in logistics. Most importantly, it exited the liner business to stop the losses.

MISC officials said there are no immediate plans to sell the business. It still brings value to the Petronas group but there is a good price for it … it will.

MISC is always dynamically reassessing its portfolio of businesses to ensure that it delivers the best returns and value to its shareholders. Therefore it will certainly evaluate offers and opportunities that come along.

MISC is now (Jan 2013) well on the way to recovery and is focused on its key businesses of LNG, petroleum shipping, chemical shipping, offshore , tank terminal and marine and heavy engineering through MMHE.

MISC’s LNG prospects seem squarely linked to those of its parent company Petronas with Petronas’ 100% acquisition of Canadian natural gas producer Progress Energy Res Corp, market observers are not ruling out the possibility of MISC shipping gas from Canada to Asia.

MISC had 27 LNG carriers as at end Dec 2011, excluding its two floating gas storage units (FSUs). The FSUs are time chartered to Petronas Gas and deployed at Malaysia’s maiden regasification terminal at Sungai Udang in Melaka.

With part of the proceeds from the sale of half of Gummusut-Kakap channeled into its offshore business, this segment – with a steady income stream – appears to have the necessary ingredients for expansion. MISC’s remaining 50% interest in Gummusut-Kakap will allow it to equity account the profits of the floating production unit once it begins charter to Shell from April 2013.

MISC and its joint venture partner Vitol, the world’s largest oil trader, plan to almost double the capacity of their Johor terminal by middle of 2014. MISC and Vitol are planning on more tanks and capacity by mid 2014 with the intention of leasing them.

MISC’s petroleum shipping business, operated through American Eagle Rankers which MISC acquired in 2003 was loss making as it weathered a shipping downturn plagued by depressed charter rates and vessel overcapacity. The segment was still in the red in 2012.

In 2012, it took delivery of four shuttle tankers which are on a 15 year time charter to Petrobras. On order was another four VLCCs for delivery in 2013 and two DP shuttle tankers slated for 2014 to 2015.

Valuation wise it is a boomed out stock among the FBM KLCI components.

Its net assets per share stood at rm4.84.

The shipping gaint is still sailing in choppy waters as reflected by its earnings that have been trending downwards over the past five years prior to Dec 2012 amid prolonged overcapacity and flow freight rates.

Nonetheless, most of the negative news has been factored into the stock (07 Jan 2013) The market had oversold the stock on the basis of negative news from MHB. MISC has 66.5% equity stake in MHB. The earnings of which have not met expectations.

In such a tough operating environment (Jan 2013), MISC has made valiant efforts to strengthen its financial footing.

The group took the bold step of exiting the liner business in which it had been making losses. It also sold its 50% equity stake in the Gumusuit-Kakap semi floating production system to a wholly owned subsidiary of Petronas Carigali Sdn Bhd pockeing rm5.29 million cash. Expect the deal to reduce its gearing ro 30% from 50%.

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