MARC has affirmed the short and long term ratings for MISC’s RM1.0 billion Murabahah Commercial Paper/Medium-Term Notes (“MCP/MTN”) at MARC-1ID and AAAID with a stable outlook, underpinned by the Group’s solid operating fundamentals; its dominant position in the Malaysian shipping industry particularly the liquefied natural gas (“LNG”) segment; extensive global reach via American Eagle Tankers Inc. Ltd. (“AET”); sound financial profile characterised by resilient profitability and low debt leverage; exceptional financial flexibility; and the strong support of its majority shareholder, Petroliam Nasional Berhad (“PETRONAS”).

With a diversified fleet of 132 vessels and two (2) Floating, Production, Storage and Offloading (FPSO)/ Floating, Storage and Offloading (FSO) as at 30 June 2006, MISC is the dominant shipping and logistics services provider in Malaysia especially in the energy-based transportation sector. MISC also has the distinction of being the largest single owner/operator of LNG tankers in the world with a fleet of 21 tankers, which is expected to increase to 29 tankers by 2008. As the sole transporter of LNG from Malaysia (the world’s third largest LNG exporter), MISC is in a favourable position to benefit from the growing demand for LNG transportation given its long term contracts with PETRONAS (15 to 20 years on average).  The acquisition of AET in 2003 helped to broaden the Group’s earnings base and has transformed MISC into the second largest owner-operator Aframax fleet in the world, extending its market reach to the Atlantic Basin, complementing its existing presence in Europe, Mediterranean, Arabian Gulf and the Far East.

The Group achieved a record revenue of RM10.8 billion for financial year ended 31 March 2006; though the growth is largely muted at 1% (FY2005: RM10.7 billion) amidst declining freight rates in most of the shipping segments. Profitability, after adjusting for exceptional gain on vessels disposal, remained largely intact with operating margin for FY2006 stood at 28.8% (FY2005: 30.6% - excluding gain on vessels disposal amounted to RM1.9 billion). For the first 6 months up to September 2006, MISC delivered operating profit of RM1.4 billion on the back of RM5.5 billion revenue. Revenue and profit growth, going forward, will be driven by the Group’s on-going capacity expansion especially in the chemical tanker segment and offshore business segment in view of rising petrochemical production capacity in the Middle East as well as increasing deepwater exploration activities by oil majors worldwide in view of prevailing high crude oil prices.

The Group’s cash flow position further strengthened, underpinned by the stable charter revenue stream from the LNG business. MISC’s balance sheet continuously display 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.

The Group’s debt leverage of 0.33 times, based on unaudited financial statement as at 30 September 2006 is considered low by shipping industry norms, as compared to the global industry average. MISC enjoys exceptional financial flexibility, in the light of its substantial cash balance; its 62.44% ownership by PETRONAS; and superior access to capital markets (both local and international). Furthermore, the US Dollar denominated shipping revenue provides a natural hedge against exchange rate volatility in relation to the Group’s sizeable foreign currency debt obligations and USD-based capital expenditure programme.