Highlight MISC in talks to sell more chemical tankers

by **Cals** Mon 02 Jun 2014, 23:56

Highlight MISC in talks to sell more chemical tankers

Business & Markets 2014

Written by Cynthia Blemin of theedgemalaysia.com

Monday, 02 June 2014 08:34

KUALA LUMPUR: MISC Bhd is currently in advanced talks to sell another raft of chemical tankers from its A-class fleet. Should the sale come true, the shipping giant could fetch prices in excess of US$231 million (RM741.5 million).

An industry source familiar with the matter told The Edge Financial Daily that MISC, which has an inventory of seven ships in its A-class fleet of 38,000-dwt IMO type-II/III chemical/products tankers, is already in advanced talks to sell the tankers.

“This is part of the group’s rationalisation plan, but not all seven will be sold,” the source said, adding that MISC has been downsizing its chemical tanker fleet and is expected to wrap up the deal soon. MISC sold seven chemical tankers in April.

It is understood that MISC is looking to hive off its fleet to reduce its exposure to the chemical tanker segment as the prospects for the chemical and shipping market remain challenging due to an oversupply of vessels.

In March, MISC entered into a share sale and purchase agreement to dispose of its unit, MISC Integrated Logistics Sdn Bhd, to Golden Age Logistics Sdn Bhd, a special-purpose vehicle wholly owned by Utusan Printcorp Sdn Bhd for RM250 million.

Kenanga Research in a note recently said the disposal was not surprising as MISC had been looking to divest its non-core and non-performing assets.

Last week, international shipping publication TradeWinds quoted brokers as saying that the MISC tankers reportedly up for sale are the STX-built Bunga Akasia and Bunga Alamanda (both built in 2009), Bunga Allium, Bunga Angsana, Bunga Angelica, Bunga Azalea and Bunga Aster (all built in 2010).

In April, MISC sold four 45,000-dwt B-class medium-range (MR) tankers to United Arab Chemical Carriers (UACC) of Dubai and three 19,800-dwt K-class stainless steel chemical tankers to Sinochem International Co Ltd. MISC is estimated to have collected US$200 million from the disposals.

Once all the A-class vessels are sold, MISC will no longer own any chemical tankers, reported TradeWinds. The company will then be left with only six 19,000-dwt L-class chemical tankers in its fleet that are on long-term charters with Japanese trading-house interests. According to the report in TradeWinds, these vessels are said to be mostly used in the palm oil trade.

“Four years ago, MISC laid out a strategy roadmap that was aimed at stabilising the financial performance of the group and rebuilding the strength of our balance sheet.

“The global financial crisis and prolonged downturn in the shipping sector has forced us to re-examine our past objectives and strategies,” MISC chairman Datuk Manharlal Ratilal said in the company’s 2013 annual report.

MISC has been forced to re-think the meaning of business resilience, which has given birth to its business portfolio and asset rebalancing strategy, he added.

In 2011, MISC discontinued its container shipping business which had resulted in losses of US$789 million (RM2.52 billion) over three years.

Last year, MISC’s controlling shareholder Petroliam Nasional Bhd (Petronas) wanted to take the shipping giant private at RM5.50 per share but its attempt failed.

The shipping company’s stock continued to climb in a bumpy ride following the failed privatisation exercise. It marched to a 3½-year high of RM7 in mid-March this year before retreating to RM6.18 last Friday.

The renewed interest in MISC is mainly driven by its improved earnings performance in the past three financial quarters.

For the first quarter ended March 31, 2014 MISC’s net profit jumped nearly 62% to RM486.3 million from RM300.4 million in the previous corresponding quarter. Earnings per share expanded to 10.9 sen from 6.7 sen. Revenue, however, fell slightly to RM2.29 billion from RM2.37 billion.

MISC attributed the decrease in revenue to lower revenue at its heavy engineering division, as projects in hand neared completion with low value of outstanding progress billings while new projects were in the early stages of construction. Its chemical business recorded lower revenue from the smaller fleet of operating vessels.

This article first appeared in The Edge Financial Daily, on June 2, 2014.