KUALA LUMPUR: MISC Bhd's headline profit is expected to normalise in the second half of the year (2H22) with potentially more liquefied natural gas (LNG) contract wins ahead.
In a note, RHB Research said MISC's 1H22 net earnings of RM834 million are within the firm's and street projections at 54 per cent and 46 per cent of full-year estimates.
MISC recorded a net profit of RM461 million in the second quarter (Q2) after stripping off RM310 million in impairment of LNG carriers, a US$40 million additional Mero 3 floating production storage and offloading (FPSO) vessel cost provision and an RM6 million gain on ship disposals.
"As such, its recent share price weakness has led to attractive entry levels, backed by an attractive dividend yield of five per cent," it noted.
The bank-backed research firm stated that MISC's robust performance led to the petroleum division's stronger year-on-year (YoY) performance, which stemmed from higher mid-sized tanker rates and higher LNG profit.
"Cumulatively, 1H22 core earnings also improved by 24 per cent YoY, on the back of a stronger heavy engineering division – led by the reversal of cost provisions, dry-docking activities as well as LNG (21 per cent, higher earnings days and lower dry-docking activities). However, this was offset by the weaker offshore divisions," it said.
The research firm said the Mero 3 project was 48 per cent completed as of Q2, with the delivery date being pushed by six months to mid-2024.
MISC noted that the Mero 3 project cost has risen by nine per cent, and the additional cost will be recognised accordingly, based on the completion percentage.
"On the other hand, its term-to-spot ratio within the petroleum division increased to 72:28 from 65:35 in Q1.
"The near-term outlook of the petroleum tanker market should be positive, with continuing growth in global oil demand and supply.
"Following the delivery of the two dynamic positioning shuttle tankers (DPST) in 2Q22, there will be one more DPST to be handed over in 2H22, followed by two LNG carriers and one very large crude carrier in 1H23," it added.
The firm upgraded the stock to 'Buy' with a target price of RM7.79.