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Sunday, June 05, 2011

MISC to rely on LNG, heavy engineering to keep afloat in next few years

PETALING JAYA: Shipping giant MISC Bhd will have to rely on its liquified natural gas (LNG) shipping and heavy engineering business to keep it afloat in the next few years as its other shipping divisions are still recuperating from cyclical losses.
MISC’s petroleum, chemical and container shipping businesses continued to post losses as reflected in its quarter-four financial performance ended March 31.
CIMB Research said the LNG shipping division would remain the bedrock of MISC earnings, acting as a shock absorber for losses at the cyclical shipping arms.
“LNG operating earnings have been more or less stable in US dollar terms, with some ups and downs caused by variations in dry-docking days.
“Ringgit-denominated earnings, unfortunately, have been on the decline due to the gradual depreciation of the greenback as 23 of its 29 LNG vessels are employed on long-term charters with Petronas.”
It, however, said the growth from this division would come from the two vessels that were currently undergoing conversion into floating storage regasification units (FSRU) which will be ready in the middle of next year.
“These two FSRU units will be located off the coast of Malacca to enable Petronas gas to import LNG into Malaysia from overseas sources.”
MISC had also secured a four-year charter with International Gas Transportation Co to ship LNG from Australia North West Shelf project from the second quarter of this year onwards, said the research house in a recent report.
Another strong business in MISC stable is contributed by its 66.5%-owned subsidiary Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) as it is expected to secure more contracts.
MISC reduced its stake in MMHE from 100% to 66.5% after the latter was publicly listed last October.
“The order book has gone down from over RM5bil a year ago to RM3.1bil but MMHE should be able to top it up to RM6bil to RM7bil as more contracts are expected to roll in,” it said.
Kenanga Research said the replenishment for MMHE’s order book was expected to come from domestic projects such as the Tapis rejuvenation project and Malikai deepwater development.
“Likewise, offshore division is also expected to step up activities in FY2012 with Gumusut-Kakap deepwater development while FPSO Cendor will commence operations in 2013,” it said.
Meanwhile, MISC said in a note accompanying its latest financial results that within its energy-related shipping segments, the LNG business continued to provide stability to the group via its stream of secured and recurring earnings through its portfolio of long-term contracts.
“However, we expect the market to be challenging for the petroleum and chemical tanker businesses due to a prolonged overcapacity in the industry.
“As for our integrated liner logistics segment, we see improvements in our operations as a result of the restructuring and repositioning of MISC as an intra-Asian player in the beginning of 2010,” said MISC.
In its fourth quarter ended March 31, MISC made a net loss of RM307.9mil compared with a net profit of RM196.4mil in the previous corresponding quarter while revenue fell 11.6% to RM2.9bil for the quarter under review.
On a full-year basis, the group’s revenue fell 10.5% to RM12.3bil from RM13.8bil previously.
However, net profit rose to RM1.87bil from RM682mil.
Moving on to a more difficult business division of the group, CIMB Research expected MISC petroleum shipping arm AET Tanker Holdings Sdn Bhd to continue posting losses in 2012 and 2013, albeit on a declining trend.
“AET has had three consecutive quarters of losses as low rates are reflected in renewed contracts as we do not expect spot rates to improve until 2013 due to significant oversupply of ships,” it said.
As of the end of March, time charter equivalent rate (TCE) for very large crude carrier fell 22% while aframax TCE rates fell 4% year-on-year.
Its chemical tankers that had suffered 12 consecutive quarters of losses since the financial crisis, according to CIMB Research, was showing dramatic improvement by narrowing losses.
“In its recent fourth quarter ended March 31, the division operating loss decreased to RM8.2mil from RM37.7mil a year ago.
“This was attributed to 24% quarter-on-quarter rise in spot rates partly due to the rapid improvement in palm oil shipping rates,” it said, adding that palm oil was a major commodity carried by MISC chemical tankers.
On its liner business, MISC’s performance seemed to contradict the market trend as other global carriers (that were severely impacted by the global economic crisis) seemed to have “crawled out of the gutter.”
CIMB Research said that although MISC had pulled out from Asia-Europe trade in January 2010, the container division’s quarterly losses persisted albeit lower than 2009.
Going forward, the research house expected the narrowing trend of losses to continue due to three factors – termination of loss-making routes, the arrival of reefer boxes that were expected to boost yield and more positive spread on its four super-post panamax ships.

so hope lepas ni cube lah memahami keadaan dan tak perlu la main serkap jarang aje ye..sekian terima kasih..

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