Investment Highlights

• We maintain HOLD on MISC with an unchanged sum-ofparts (SOP) based fair value of RM7.81/share, which implies an FY24F EV/EBITDA of 8.4x, slightly below its 3-year average of 9x (Exhibit 2). Our fair value also reflects a premium of 3% for our 4-star ESG rating (Exhibit 5).

• Upstream reported that Petronas had recently issued tender documents to selected floating production, storage and offloading (FPSO) suppliers for the Kelidang ultradeepwater gas project offshore Brunei. A tender is expected by May 2024, whilst the award is likely to be handed out in 2025F after taking the final investment decision (FID). A pre-bid meeting will take place in January 2024.

• The Kelidang cluster is located on Block CA-2, about 125 km off the coast of Brunei (Exhibit 1) and contains 3 discoveries: Kelidang North East, Keratau and Keratau South West, which are said to have combined reserves of several trillion standard cubic feet of gas.

• The project is held through a joint venture with Shell and Brunei National Petroleum Company (PetroleumBrunei), with Petronas as the operator. It aims to provide backfill supply for Brunei’s largest domestic LNG plant in Lumut.

• The projects’ field development plan involves a FPSO vessel with a gas handling capacity of up to 450mil standard cubic feet per day (MMscfd) installed in water depth of 150 meters with a network of flowlines connecting up to 6 subsea trees installed in water depths of 2000 meters.

• Upstream cited industry sources as saying that the proposed floater will be leased on a 12-year charter contract with an option period of 3 years. Additionally, Petronas is open towards both conversion and redeployment options, but the former is preferred given the lack of relevant spare vessels for use in the region.

• Companies that are said to be up for the job include MISC, Yinson, Bumi Armada, MTC Group, Bluewater, and Shapoorji Pallonji Energy.

• As Petronas’s equity stake in MISC is 51%, we believe that MISC is well positioned to win the charter contract. Assuming a capex assumption of US$750mil, project IRR of 12%, WACC of 7.0% and 60:40 debt-to-equity structure, we estimate this could accrete 3.3% to MISC’s SOP.

• MISC currently trades at a fair FY24F EV/EBITDA of 8.9x, close to its 3-year average of 9x.

Source: AmInvest Research - 28 Dec 2023