MISC upgraded to outperform

PETALING JAYA: MISC Bhd’s stable dividend yield of about 4% which provides defensiveness and limits downside risk over the long term, has earned the stock an upgrade by Kenanga Research from market perform to outperfrom.

The research house said the group was among the better picks among FBM KLCI constituents, in terms of stable dividend yields.

It also noted that the company is increasing efforts in tapping into the global floating production, storage and offloading (FPSO) market, while also slowly reducing its exposure in the spot tanker market.

“MISC has increased its efforts in tapping into the global FPSO market, identifying it as a key growth market for the group moving forward. The company is preparing to submit a bid for a mega FPSO project in Brazil by the end of the year, with a capex of about Us$2bil,” it said in a note yesterday.

The company is believed to have also submitted bids in partnership with for Yinson Holdings Bhd for the Limbayong FPSO project by Petronas, with an estimated capex of Uss700mil. Despite the group’s limited experience in the large-size FPSO market, the research house believed any successful project win from this space would be a significant positive for the company.

Over the longer-term, it noted that the company is strategically limiting its fleet size for tanker vessels while also making an effort to shift its portfolio more towards term charters, thereby limiting its exposure to the fluctuations of the spot market.

At the moment, MISC’S portfolio of petroleum shipping tankers (fleet of 78 vessels) stand at 65% term charters, and 35% spot charters.

“MISC has scheduled seven shuttle tankers for delivery in the coming months, which we believe will serve longer-term time charters,” it said.

Kenanga Research raised its target price to RM8.80, from RM7.60.