2013-11-08 [ ][ ] MISC

source: [i3investor]

KUALA LUMPUR: MISC Bhd, which Petroliam Nasional Bhd (Petronas) tried to privatise in February citing its bleak outlook due to capacity oversupply in the shipping industry, proved its parent company wrong by posting better results for the first nine months of the current financial year ending Dec 31 (FY13). 

MISC raked in a net profit of RM1 billion for the nine months ended Sept 30, a whopping 1,939% jump from the RM49.13 million recorded in the previous corresponding period. For the third quarter alone, its net profit rose to RM401 million from RM138.89 million in the previous corresponding quarter. 

The company, in a filing with Bursa Malaysia yesterday, attributed the improved earnings to a higher share of profit from joint ventures (JV), especially from the commencement of Gumusut-Kakap floating production system in June 2013. 

Additionally, the group recorded a net impairment reversal of RM23.8 million in the current year compared with an impairment charge of RM181.6 million in the previous corresponding period. 

Petronas, which owned a 62.67% stake in MISC when it proposed the privatisation, failed to take the shipping company private following strong opposition from its other shareholders. 

The national oil company had to raise its original offer price of RM5.30 to RM5.50 per share in April after its substantial shareholder, the Employees Provident Fund (EPF), held out for a higher price. 

Petronas eventually received a 86.07% acceptance level but it was 3.93% short of the 90% shareholding level to make the offer unconditional. 

Following the failed privatisation exercise, Petronas dropped a bombshell in August when it announced its move to buy ships directly for liquefied natural gas (LNG) transport, which has been MISC’s mainstay. 

Analysts saw this move as a second attempt to privatise MISC, and described the move as “disturbing”. However, this did not affect MISC very much due to stronger shipping rates and lower bunker fuel costs. 

Analysts said MISC’s strong financial showing for the first nine months (9M) of FY13 was mainly due to the divestment of its liner shipping business in June 2012. The liner business, which had bled the shipping group, reported a net loss of RM622.6 million for FY12. 

For 9MFY13, the liner business recorded an operating loss of only RM3.6 million, compared with a loss of RM438 million in 9MFY12. 

For the third quarter (3Q), the reversal of net impairment and fully accounted losses of its discontinued liner operations pushed MISC’s profit up. 

The profit increase was also attributed to lower general and administrative expenses, a RM20 million decrease in the provisions for net impairment and a RM6.6 million increase in gain on ships disposal. Share of profit from JV for the quarter doubled to RM136.7 million from RM62.1 previously. 

MISC expects long-term contracts in LNG and offshore businesses to continue to provide stability to the group, going forward. This is despite chemical and petroleum shipping prospects remaining challenging amid vessel oversupply in the market. 

MISC is still not out of the woods yet as it is currently in a net debt position of RM6.04 billion as at Sept 30. Of the total, RM3.37 billion consisted of short term interest bearing loans and borrowings. 


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