MISC Bhd’s latest contracts for two newbuild liquefied natural gas (LNG) carriers are projected to have a daily charter rate of between US$110,000 and US$120,000 per day.
This is in consideration of the vessels’ capacity of 174,000 cubic m, similar to the other latest newbuilds, as well as its long-term nature, said CIMB Research.
On Oct 2, MISC announced it has signed a letter of intent with PETRONAS LNG Sdn Bhd for two newbuild LNG carriers, with a 15-year duration starting in 2027.
However, details such as contract value, capacity and specifications, as well as the exact commencement date were not disclosed. Assuming a total capital expenditure of US$460mil (RM1.9bil) for the new contracts, the research house estimated an internal rate of return of 10.3%.
Annual earnings before interest, taxes, depreciation and amortisation contribution of about RM265mil and core net profit contribution of RM47mil to RM120mil are also expected from the financial year of 2027 (FY27) onwards.
Financing for the construction of the two new LNG carriers is unlikely to pose an issue given MISC’s healthy balance sheet, with net gearing at a low 0.2 times.
“We have confidence in MISC’s ability to execute the project, considering its extensive experience in LNG shipping,” stated CIMB Research.
The research house also commented on MISC’s agreement with PETRONAS for the early termination of three existing steam LNG carrier time charters (Seri Ayu, Seri Angkasa, and Seri Begawan – Seri AAB) and for them to be redelivered on their 20th anniversary in 2027 to 2028.
MISC will receive compensation for the early termination.
The extension of time charters was also agreed for two existing LNG carriers (Seri Alam and Seri Amanah – Seri AA) from their current contracts expiration in 2025 and 2026 until March 31, 2028.
“Without considering the compensation (amount of which is unknown), we estimate the early termination of the Seri AAB charters would lower MISC’s FY25 to FY26 revenue by 2.1% to 1.5% and core net profit by 8.4% to 5.7%.”
CIMB Securities Research has maintained its “buy” call on MISC, with an unchanged target price of RM10.25 per share.
Source: The Star
