KUCHING: Analysts are feeling optimistic on MISC Bhd’s (MISC) outlook, believing its growth will be driven by the liquefied natural gas (LNG) segment that is supported by new liquefaction projects.
“We feel optimistic on MISC’s outlook, especially after a low earnings base last year,” the research arm of Kenanga Investment Bank Bhd (Kenanga Research) said in its latest results note on the group.
“Freight rates have staged a decent recovery during the year, and are likely to remain robust moving forward, especially for the winter season in the fourth quarter (4Q), as US sanctions combined with tonnage being taken off market for scrubber installations have tightened supply.
“Meanwhile, global floating production, storage and offloading (FPSO) awards are also likely to remain strong for the next few years, especially from Brazil and Africa, with MISC identifying the FPSO market as one of the key growth drivers for the company.”
Moving forward, the research arm of MIDF Investment Bank Bhd (MIDF Research) reiterated that growth in will be driven by the LNG segment that is supported by new liquefaction projects (Cameron LNG and Prelude FLNG) and reduced reliance on coal in China and Korea.
“This in turn would provide growth for the remaining months and later on spill over to financial year 2020 (FY20),” MIDF Research said.
“As for the petroleum tanker business, the decision to remain with delaying retrofitting of scrubbers and demolishing activities to capitalise on the temporary surge in spot rates will eventually exert downward pressure on tanker rates until the year end.”
According to MIDF Research, even if demolition levels were to increase following the IMO2020 in January 2020, positive impacts of lower number of tankers to freight rates would be partially offset the extension of the Organisation of the Petroleum Exporting Countries (OPEC) cuts and lower expected oil demand growth.
It recapped that US Energy Information Administration revised lower projected oil demand in FY20 to 1.3 million barrels per day.
“As for heavy engineering, even if the segment becomes profitable due to marine repair activities amidst impending compliance of the IMO 2020 sulphur cap and contribution from Kasawari Gas Development project, impact to MISC’s bottom line will still be below five per cent.
“The only major catalyst for MISC is the potential job wins for the offshore segment in FY20 worth close to US$6 billion which includes FPSO Mero 3 and FPSO Limbayong.”