Friday, November 25, 2011

HDBSVR cuts MISC target price to RM6.60 from RM7.60

KUALA LUMPUR (Nov 25): Hwang DBS Vickers Research has reduced its sum-of-parts based target price for MISC BHD [] to RM6.60 from RM7.60 previously.

It said on Friday that although MISC has exited one of its loss-making businesses, it remained concerned about the weak outlook for crude tanker shipping.

'However, downside should be limited by stable income from its LNG shipping and offshore divisions,' it said.

HDBSVR said the 2Q9M11 core net profit of RM151 million (+31% on-quarter) takes earnings this year to RM267 million, or 68% of its full period forecast. It said MISC's earnings were driven by its offshore & heavy engineering division (+18% on-quarter).

But its petroleum division continued to suffer with spot rates for VLCC and Aframax vessels falling 13.7% and 15.2% on-quarter, respectively. Its 48% exposure to spot rates also stifled the division's performance.

MISC decided to exit the liner business after incurring RM2.8 billion losses over the past three financial years.

'Containership timecharter rates continued to drop by another 19% QoQ, and are unlikely to improve in the near term due to tonnage oversupply. FY11 earnings had been downgraded as MISC will be hit by a one-off RM1.1 billion provision relating to the cessation of its liner business.

'However, FY12F and FY13F earnings will surge 64% and 76%, respectively, because of its move to cut losses at the liner division,' said HDBSVR.

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