Tanker rate set to lift MISC

PETALING JAYA: Improved rates for MISC Bhd’s petroleum tanker division is expected to boost the company’s earnings for its fourth quarter ended Dec 31, 2013 (Q413).

“Thanks to strong Asian imports for stockbuilding and refineries ahead of higher winter demand, Q413’s overall petroleum tanker rates soared 45% to 352% quarter-on-quarter and 82% to 108% year-on-year,” said RHB Research Institute in a note yesterday.

“MISC’s petroleum tanker fleet mostly comprises Aframax vessels, whose rates have risen by as much as 45% quarter-on-quarter and 102% year-on-year to an average US$20,400 (RM69,360) per day, slightly above the break-even level of US$20,000 per day.”

The research house added that this would bring some relief to MISC, as its petroleum tanker losses were expected to shrink in Q4 onwards.

RHB, nevertheless, noted that the strong rally in tanker rates for MISC was short-lived as overall rates this week plunged 35% to 50% week-on-week to the November 2013 levels, which was at the mid-point of the rally that started in October.

“Fortunately, though, Aframaxes saw a smaller drop as activities in the Gulf of Mexico remained buoyant despite the harsh winter, as opposed to the very large crude carrier (or VLCCs), which saw chartering activities on shipments to Asia ease.

“We expect the volatility to persist and have factored in 15% and 20% to 25% increases in average rates for financial years 2014 (FY14) and FY15 respectively for MISC’s petroleum and chemical fleet.”

Looking forward, an analyst from a local bank-backed brokerage said he was cautious about MISC’s petroleum tanker division.

“Oil tanker rates are cyclical and seasonal. Therefore, the business can be quite volatile,” he said.

In its notes accompanying its Q313 earnings, MISC said the prospects of its chemical and petroleum shipping prospects remained challenging, amid a vessel oversupply market.

The shipping company added that long-term contracts in liquefied natural gas and offshore businesses continued to provide stability to the group.

RHB said it expects MISC’s FY14 earnings to be within estimates, projecting a 70.9% year-on-year growth for the company.

“While the group’s petroleum tanker segment may see lower than anticipated losses due to higher rates, this is likely to offset the earnings shortfall at its heavy engineering division, which saw delays in the Malikai deepwater project.”