Kenanga upbeat on MISC's sale of RM250m logistics business

by **Cals** Tue 25 Mar 2014, 00:38

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Monday, 24 March 2014 13:35

KUALA LUMPUR (Mar 24): Kenanga Research says it is buoyant on MISC Bhd’s disposal of its logistics business for a cash consideration of RM250 million, which it deems a ‘favourable price’.

In a note today, the research house says the disposal frees up more cash for investments in energy and petroleum related shipping business where operating conditions may improve in the medium-term.

Last week, the shipping giant entered into an agreement to sell MISC Integrated Logistics Sdn Bhd (MILS) to a special purpose vehicle of Utusan Printcorp Sdn Bhd – Golden Age Logistics Sdn Bhd.

As at Dec 31, 2013, the net assets of MILS stood at RM246.5 million, which implied a price to book value of one time based on the selling price.

“This disposal is not a surprise to us as MISC has been looking to divest their non-core businesses and focus on their core shipping business,” said Kenanga research analyst Lim Sin Kiat.

As a result of the disposal, Lim trimmed his core earnings forecast for FY14 and FY15 by 0.5% and 0.6% respectively, to account for the loss of income from the logistics business.

Lim upgraded the target price to RM6.87 but maintained an ‘underperformed’ call on MISC at RM7.01.

He noted the overall improved outlook for the global petroleum market this year with demand for vessels showing actual improvements.

“But management expects delivery of vessels for the global petroleum market this year to be similar to last year,” Lim said.

Furthermore, Lim said MISC’s chemical tanker segment was expected to be fairly stable this year with removal of sanctions on Iran viewed positively for longer term chemical exports.