MISC announced that it has secured contracts for 3 newbuild LNG carriers from QatarEnergy for a firm period of 15 years from 2026 onwards. This is on top of the 3 newbuild LNG carriers (25% effective stake of 12 LNG carriers) MISC secured together with its consortium partners from QatarEnergy previously. We view this update positively as this replaces some of MISC’s expiring time charter contracts with new ones. No change to earnings forecasts pending clarity on the vessel delivery timeline. Maintain Buy with an unchanged TP of RM8.30/share based on 15.5x CY25 EPS. MISC is the top contender for future FPSO projects and is well positioned to benefit from increasing demand for LNG shipping.

Details of the Contract

MISC announced that it has secured contracts for 3 newbuild liquefied natural gas (LNG) carriers from QatarEnergy. The 3 vessels will be built by Samsung Heavy Industries Co Ltd and will be chartered by QatarEnergy for a firm period of 15 years from 2026 onwards.

Our Take

We view this update positively as this replaces some of MISC’s expiring time charter contracts with new ones. QatarEnergy has been aggressively expanding its fleet size, contracting a total of 104 LNG ships in two phases amidst its push to position itself as the world’s top LNG exporter. Recap that MISC, through a consortium with 3 other partners (where MISC has 25% equity stake) secured long-term contracts for 12 newbuild LNG carriers (effectively 3 LNG carriers for MISC) under QatarEnergy’s Phase 1 shipbuilding program where delivery is expected from 2025 onwards. The latest job win adds another 3 vessels to be delivered from 2026. These vessels will have a capacity of 174k cubic meters.

We estimate the capex per newbuild vessel is around USD200mn-220mn and has a daily charter rate (DCR) of USD70k-90k, translating into a high single-digit to low double-digit IRR. Nonetheless, we believe that these contracts are insufficient to completely replace the expiring long-term contracts, where we estimate the DCR to be above USD100k.

Impact

No change to earnings forecasts pending clarity on the vessel delivery timeline.

Valuation

Maintain Buy with an unchanged TP of RM8.30/share based on 15.5x CY25 EPS. MISC is the top contender for future FPSO projects and is well positioned to benefit from increasing demand for LNG shipping.

Source: TA Research - 2 Apr 2024