Offshore disappointed but improving outlook for FY22
Expecting better performance ahead
Results were below expectations due to disappointing offshore segment from higher cost provisions and wider losses from MMHE. Having said that, we remain cautiously optimistic on FY22E, as reflected in our +21% earnings growth assumption, supported by better performance from Offshore (assuming costs normalised with the absence of provisions for FPSO construction) and MMHE (assuming higher new orders secured). We have tweaked our FY22/23E EPS by -2%/1% and lowered our SOP-derived TP to RM7.56 (-2%) on housekeeping adjustments; maintain BUY, with 13% upside (inc. 4.7% FY22E DY) from current prices.
Results below our expectations; within consensus
Excluding exceptional items of MYR16m, 4Q21 core net profit of MYR445m (+9% QoQ, -7%YoY) brought FY21 core net profit to MYR1.89b (-13% YoY), making up 90%/103% of our/street’s full-year forecasts. The company declared a 4th interim DPS of 12sen/shr, bringing FY21 DPS to 33sen/shr (flattish YoY).
4Q21 results snapshot
Key takeaways for 4Q21’s results: (i) GAS posted better PBT (+44% YoY, +12% QoQ), mainly from improved charter rates and increased operations following the deliveries of 5 VLECs since 4Q20; (ii) Petroleum PBT returned to the black at USD4m (4Q20: -USD10m; 3Q21: -USD24m), owing to a favourable term to spot ratio of 71:29 (from 65:35 YoY) and increased contributions from its new DPST; (iii) Offshore PBT (-39% YoY, flattish QoQ) was dragged by higher cost provisions for construction of an FPSO; (iv) MMHE’s losses ballooned to -MYR26m (4Q20: -MYR3m; 3Q21: -MYR5m) from disruptions for its HE projects and lower dry-docking activities.
The worst is (possibly) over?
Despite the near-term headwinds posed by the threat of Omicron’s surge globally, we are cautiously optimistic of a better FY22 for MISC as OPEC+ ramps up production in-line with firm crude prices. With the Mero 3 FPSO continuing to accrete positively and the petroleum segment expected to come off multi-year low charter rates by 2H22 and see improved contributions/margins from 5 new DPST deliveries throughout FY22, we remain sanguine on MISC’s prospects at this juncture. Maintain BUY.