Analysis Petronas’ ship purchase seen as second MISC privatisation attempt

Analysis Petronas’ ship purchase seen as second MISC privatisation attempt
Business & Markets 2013
Written by Chong Jin Hun of theedgemalaysia.com
Friday, 02 August 2013 10:57

KUALA LUMPUR (August 2): Petroliam Nasional Bhd's (Petronas) move to buy ships directly for liquified natural gas (LNG) transportation is seen as a second attempt to privatise the national oil firm's 63%-owned subsidiary MISC BHD [], market observers and analysts said.

A market observer told the theedgemalaysia.com that privatising shipping firm MISC will give Petronas the "flexibility" to manage the latter's LNG shipping-capacity cost.

The market observer said MISC is expected to benefit from Petronas' move as the both firms will be able to share the cost of buying new LNG ships.

Petronas said in statement that it will directly buy newly-built ships to meet its LNG transportation requirements.

The firm said the move will allow the company to have direct access to LNG shipping capacity at the lowest possible cost. Petronas will engage the technical expertise of MISC for the CONSTRUCTION [] of LNG ships

Meanwhile, RHB Research Institute Sdn Bhd analyst Ahmad Maghfur Usman said the firm believes Petronas might have been prompted by the view that MISC should share the capital expenditure burden whenever the Petronas buys new vessels.

In a note today, Ahmad Maghfur said this in anticipation of Petronas requiring more ships to transport LNG globally.

"All said, Petronas’ big push in LNG fleet expansion may also well suggest a second go at privatising MISC," he said.

On MISC, Ahmad Maghfur said RHB is maintaining its earnings estimates for the firm as the research house waits for further updates from MISC.

"MISC is targeted to release its 1HFY13 results on 16 August. We expect earnings to improve sequentially and y-o-y on the back of stronger rates and lower bunker fuel costs," he said.

RHB has maintained its "buy" call for MISC shares with an unchanged target price of RM6.40. The stock rose five sen to RM5.42 at 10.45am.

According to Ahmad Maghfur, the strengthening US dollar against the ringgit bodes well for MISC.

"As our financial forecasts are already in US dollar, any upside in the US dollar will be reflected in the higher US dollar/ringgit (exchange rate) that we will be applying to its FV (fair value)," Ahmad Maghfur said.

Petronas had earlier this year failed to privatise MISC as the former had not secured adequate acceptance from minority shareholders for the proposed takeover offer.

This was despite Petronas revising its offer price to RM5.50 for each MISC share from the initial RM5.30.