Tuesday, Jan 08, 2002
Malaysian Rating Corporation Berhad (MARC) has reaffirmed MISC’s RM1.5 billion Murabahah Commercial Paper/Medium Term Notes Programme (2000/2005) ratings of MARC-1ID/AAAID (Islamic Debt).
The affirmed ratings on MISC reflect MARC’s belief that the solid operating fundamentals of MISC’s Liquefied Natural Gas (LNG) shipping segment will provide the company with a strong ability to withstand a more challenging market environment in respect of its liner and dry bulk segments. The ratings also take into account MISC’s leading position in several shipping segments globally, its exceptional profitability, substantial financial flexibility, and the presence of national oil company, PETRONAS, as a majority shareholder.
Established in 1968 as the national shipping line, MISC’s initial focus was in the business of liner shipping. Through the years, MISC subsequently diversified into the transportation of dry bulk commodities, petroleum, gas and chemicals. In November 1998, MISC embarked on an acquisition trail, which saw the group acquiring a LNG shipping company (PETRONAS Tankers Sdn. Bhd. or PTSB in short), a bulk shipping operator, and 51% equity stakes in two LNG shipping operators and shipping vessels as well as new buildings from PNSL Berhad. Upon the completion of the PTSB transaction, which was financed by an issue of new MISC shares, PETRONAS emerged as a 62% shareholder of the shipping company. MISC’s integration into the PETRONAS group has yielded substantial operational, financial and strategic benefits for both entities. MISC continues in its role as an important provider of shipping services to PETRONAS with respect to the transportation of LNG, crude oil, petroleum products and petrochemicals.
As the sole transporter of LNG from Malaysia (the world’s third largest exporter of LNG), MISC is in a favourable position to benefit from the growing demand for LNG. It is presently the world’s single largest owner/operator of LNG tankers with a fleet of 13 tankers and a total lifting capacity of 1.36 million cubic metres. MISC is in the midst of securing time-charter contracts for six additional LNG tankers to support PETRONAS’ LNG Tiga project, which is expected to come on stream in the first quarter of 2003. Apart from the LNG transportation segment, MISC also occupies leading positions in the dry bulk carriers, chemical tankers and petroleum tankers segments globally; it is ranked sixth, eighth and ninth respectively. Its relatively young and well-maintained fleet endows the shipping company with considerable operating strengths.
Substantial profit contributions in recent years from MISC’s growing LNG shipping segment have offset periodic weaknesses in the performance of its dry bulk shipping and liner segments. Underpinning the strong performance of the LNG Services Division, is a recurring US Dollar denominated charter revenue stream derived from 20-year time charters with Malaysia LNG, a subsidiary of PETRONAS, for the carriage of LNG. As for the liner and dry bulk segments, their sensitivity to worldwide levels of business activity, the high capital intensity of these businesses and frequent supply-demand imbalance continue to subject these businesses to a high degree of competition and cyclicality. MARC expects these segments to turn in weaker performances in the near-term as a result of depressed market conditions.
Group profit before tax for FY2001 was RM1.4 billion on revenues of RM5.8 billion, 25.3% up from RM1.1 billion for the annualized 15-month period ended 31 March 2000. Most business lines performed better during FY2001. The shipping business (excluding liner services), which contributed RM1.3 billion, recorded a 28.1% increase in pre-tax profit, due to significantly improved freight rates, an industry-wide trend, and higher vessel utilization levels for the petroleum, chemical and bulk shipping segments.
Strong discretionary cash flows from operations reduced the group’s debt leverage to 0.68 times as at-end FY2001 (FYE3/2000: 0.91 times). The group’s total debt burden is expected to trend downwards during the next several years. MISC’s gearing is considered low by shipping industry standards. Debt protection measures are strong despite continued high levels of capital spending as its cash generating capability has reduced the total needs for external financings. The balance sheet shows ample liquidity, and the group’s cash flow protection measures are capable of accommodating a reasonable degree of earnings volatility in the non-LNG shipping businesses.
MISC enjoys exceptional financial flexibility, in the light of its substantial cash balance, its 62.44% ownership by national oil company, PETRONAS, and superior access to capital markets. US Dollar denominated shipping revenues provide a natural hedge against exchange rate volatility in relation to the group’s sizeable foreign currency debt obligations. The group’s short-term debt exposure is limited, representing only 11% of its total debt as at 31 March 2001.
The affirmed ratings on MISC reflect MARC’s belief that the solid operating fundamentals of MISC’s Liquefied Natural Gas (LNG) shipping segment will provide the company with a strong ability to withstand a more challenging market environment in respect of its liner and dry bulk segments. The ratings also take into account MISC’s leading position in several shipping segments globally, its exceptional profitability, substantial financial flexibility, and the presence of national oil company, PETRONAS, as a majority shareholder.
Established in 1968 as the national shipping line, MISC’s initial focus was in the business of liner shipping. Through the years, MISC subsequently diversified into the transportation of dry bulk commodities, petroleum, gas and chemicals. In November 1998, MISC embarked on an acquisition trail, which saw the group acquiring a LNG shipping company (PETRONAS Tankers Sdn. Bhd. or PTSB in short), a bulk shipping operator, and 51% equity stakes in two LNG shipping operators and shipping vessels as well as new buildings from PNSL Berhad. Upon the completion of the PTSB transaction, which was financed by an issue of new MISC shares, PETRONAS emerged as a 62% shareholder of the shipping company. MISC’s integration into the PETRONAS group has yielded substantial operational, financial and strategic benefits for both entities. MISC continues in its role as an important provider of shipping services to PETRONAS with respect to the transportation of LNG, crude oil, petroleum products and petrochemicals.
As the sole transporter of LNG from Malaysia (the world’s third largest exporter of LNG), MISC is in a favourable position to benefit from the growing demand for LNG. It is presently the world’s single largest owner/operator of LNG tankers with a fleet of 13 tankers and a total lifting capacity of 1.36 million cubic metres. MISC is in the midst of securing time-charter contracts for six additional LNG tankers to support PETRONAS’ LNG Tiga project, which is expected to come on stream in the first quarter of 2003. Apart from the LNG transportation segment, MISC also occupies leading positions in the dry bulk carriers, chemical tankers and petroleum tankers segments globally; it is ranked sixth, eighth and ninth respectively. Its relatively young and well-maintained fleet endows the shipping company with considerable operating strengths.
Substantial profit contributions in recent years from MISC’s growing LNG shipping segment have offset periodic weaknesses in the performance of its dry bulk shipping and liner segments. Underpinning the strong performance of the LNG Services Division, is a recurring US Dollar denominated charter revenue stream derived from 20-year time charters with Malaysia LNG, a subsidiary of PETRONAS, for the carriage of LNG. As for the liner and dry bulk segments, their sensitivity to worldwide levels of business activity, the high capital intensity of these businesses and frequent supply-demand imbalance continue to subject these businesses to a high degree of competition and cyclicality. MARC expects these segments to turn in weaker performances in the near-term as a result of depressed market conditions.
Group profit before tax for FY2001 was RM1.4 billion on revenues of RM5.8 billion, 25.3% up from RM1.1 billion for the annualized 15-month period ended 31 March 2000. Most business lines performed better during FY2001. The shipping business (excluding liner services), which contributed RM1.3 billion, recorded a 28.1% increase in pre-tax profit, due to significantly improved freight rates, an industry-wide trend, and higher vessel utilization levels for the petroleum, chemical and bulk shipping segments.
Strong discretionary cash flows from operations reduced the group’s debt leverage to 0.68 times as at-end FY2001 (FYE3/2000: 0.91 times). The group’s total debt burden is expected to trend downwards during the next several years. MISC’s gearing is considered low by shipping industry standards. Debt protection measures are strong despite continued high levels of capital spending as its cash generating capability has reduced the total needs for external financings. The balance sheet shows ample liquidity, and the group’s cash flow protection measures are capable of accommodating a reasonable degree of earnings volatility in the non-LNG shipping businesses.
MISC enjoys exceptional financial flexibility, in the light of its substantial cash balance, its 62.44% ownership by national oil company, PETRONAS, and superior access to capital markets. US Dollar denominated shipping revenues provide a natural hedge against exchange rate volatility in relation to the group’s sizeable foreign currency debt obligations. The group’s short-term debt exposure is limited, representing only 11% of its total debt as at 31 March 2001.