KUCHING: Analysts believe that there is limited downside for MISC Bhd (MISC) despite the challenges seen in the liquified natural gas (LNG) sector.
The research arm of Hong Leong Investment Bank Bhd (HLIB Research) in a report, noted that LNG charter rates continued to be in the doldrums, given the oversupply of LNG ship situation. Speculators continued to build up LNG fleets ahead of LNG projects commencement.
“Two of MISC’s 27 LNG ships, which are operating on short term charters, are exposed to the negative trends,” it pointed out.
Nevertheless, the research team said petroleum charter rates remained high in in the second quarter of 2015 (2Q15) despite the weak seasonality.
“The rate was supported by weak crude oil prices (recently dropped to US$50 per bbl).
“Furthermore, Middle Eastern countries have been selling their crudes to Asia clients at discounts to their benchmark prices.
“Notably China has been the largest single buyer. We expect MISC – AET petroleum tankers to leverage on the strong momentum and report profits for the upcoming 2Q15 results (offsetting weaker earnings from LNG tankers),” HLIB Research highlighted.
Aside from that, the research team said, contract replenishment by MISC’s 66.5 per cent owned MMHE remained slow with only RM500 million awarded year-to-date.
“The fabrication industry remained lackluster given the plunge in oil price has delayed capital expenditure (capex) spending by major oil companies,” it added.
“At this juncture, we are maintaining our forecasts pending further information from management,” HLIB Research opined.
However, it upgraded its call on the stock to ‘hold’, noting it expect limited downside risk from MISC.