Petronas’  decision  yesterday  to  buy  its  own  LNG  vessels  raises eyebrows as we understand that this is one of MISC’s core businesses. Given the slew of LNG projects coming on stream by 2015, we think this shows  that  Petronas  intends  to  share  its  capex  burden.  Maintain  BUY call and MYR6.40 FV. Petronas’ push to expand its LNG fleet may be a signal of a second attempt to take MISC private.  

- Petronas  to  directly  own  future  LNG  vessels?  In  a  press  statement yesterday,  Petronas  said  it  has  decided  to  directly  procure  newbuild liquefied  natural  gas  (LNG)  ships  to  meet  its  own  transportation  needs, at the lowest possible costs. However, the nation oil corporation  did not disclose the number of LNG vessels it will order or the projected delivery dates. It is also not known whether these would apply to all or only part of its future LNG vessel fleet. We are surprised by this piece of news as we  have  been  always  under  the  impression  that  this  is  one of MISC’s core  businesses.  From  what  we  understand,  MISC  called  for  tenders from  shipbuilders  to  build  four  to  eight  LNG  carriers  in  early  February. These  vessels,  costing  about  USD200m  each,  are  targeted  to  be delivered  progressively  from  as  early  as  2015.  Based  Petronas’ statement, however, it would appear that MISC would still be involved in that  it  will  provide  project  management  and  technical  consultancy services. This would still allow it to earn revenue, but this could be much lower than what it can potentially earn as an asset owner.  

- The  rationale.  We  believe  Petronas’ may be prompted by  the  thinking that  MISC  should  take  on  a  share  of  its  capex  burden  whenever  the former  buys  new  vessels.  Early  this  month,  Petronas  applied  to Canada's  National  Energy  Board  for  a  licence  to  export  nearly  20m tonnes of LNG annually from the West Coast for 25 years beginning from 2019. In comparison, Bintulu’s LNG terminal exports 24m to 25m tonnes of LNG a year, which makes it necessary for MISC to deploy its fleet of 27  LNG  vessels.  Based  on  Canada’s annual  export  of  20m  tonnes  and assuming  the  same  tonnage  is  shipped  to  Japan,  this  would  imply covering a distance that is 45% longer. As such, we think the number of LNG  vessels  required  may  far  exceed  20  vessels.  Meanwhile,  Chevron and Shell have also applied for the same export license.  

Source: RHB