MISC BERHAD - 2022 |
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| Report ID | 6053890046890 | Popularity | 592 views 31 downloads | |||||
| Report Date | Sep 2022 | Product | ||||||
| Company / Issuer | MISC Bhd | Sector | Trading/Services - Transportation | |||||
| Price (RM) |
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| Rationale |
Rating action MARC Ratings has affirmed its AAAIS rating on MISC Berhad’s RM2.5 billion Islamic Medium-Term Notes (IMTN) programme with a stable outlook. Currently, there is no outstanding amount under the programme, which will expire end-September 2022. Rationale The rating incorporates MISC’s position as a domestic leader and a key global player in the energy-related shipping business; its stable revenue generation from long-term liquefied natural gas (LNG), ethane and offshore contracts; and its low-to-moderate leverage and healthy liquidity positions. The rating is notched up based on strong parental support from Petroliam Nasional Berhad (PETRONAS) (rated AAA/Stable) as evidenced by the significant operational and financial integration between the companies. MISC serves as the main LNG shipping provider for PETRONAS. MISC currently operates a fleet of 90 owned and seven chartered-in vessels, and 12 offshore floating facilities. It will take possession of four new petroleum tankers and two new LNG vessels between 2H2022 and 2023, and a floating production storage and offloading (FPSO) in 1H2024. MARC Ratings notes that MISC’s existing LNG charter contracts are on fixed rates and therefore are not exposed to the volatility in market charter rates. Its LNG business remains robust with a strong profit margin of about 35.1% in 2021, reflecting the strong prospects in the LNG shipping industry. In 2021, MISC’s revenue increased by 13.5% y-o-y to RM10.7 billion mainly due to the recognition of construction revenue of an FPSO project. Operating profit remained strong at RM1.9 billion backed by the stability of charter contracts in gas assets & solutions, and existing offshore assets. In 1Q2022, the group’s revenue improved y-o-y contributed by higher revenue in all segments amid the easing of COVID-19 restrictions and higher tanker rates. The group is not significantly affected by high fuel prices as fuel cost is passed through to customers under the group’s time charter contracts. However, financial performance could be weighed down by global supply chain disruptions which remain a key risk to project completion of its ongoing assets under construction. Cash flow generation declined to RM4.0 billion in 2021 from RM5.6 billion in the previous year. Free cash flow (FCF) remained negative on continued capex investment for fleet expansion, mainly for the conversion of the Mero 3 FPSO project. We foresee FCF to remain negative over the near term given the balance capex requirement for the conversion of the Mero 3 FPSO, four petroleum tankers and two newbuild LNG carriers. Group debt-to-equity (DE) ratio stood at 0.44x with net DE ratio of 0.28x as at end-March 2022. To mitigate a potentially higher leverage level from additional borrowings for capex financing, the group plans to monetise its investment in FPSO Mero 3 by selling part of its stake in the project. Rating outlook The stable rating outlook reflects high expectation of continued parental support from PETRONAS and that MISC will prudently manage its business expansion and broadly maintain its credit metrics. Key strengths
Key risks
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