AmResearch upgrades MISC (3816.KU) to Buy TP RM11.80

AmResearch upgrades MISC (3816.KU) to Buy from Hold, raises sum-of-parts derived target to MYR11.80 from MYR8.85 on recovery in tanker rates expected in 2HCY10, rebound in demand; earnings set to more than double in FY11F from FY10F. Broker turning bullish on prospects for Malaysia's largest shipping firm with container losses expected to narrow significantly after route rationalization, plans to list unit Malaysian Marine and Heavy Engineering will accelerate re-rating of unit to 18X P/E, raises group's SOP valuation by 10%. With MYR5.2 billion from recent rights issue, MISC also likely close to making major acquisition; "emphasis could be on its offshore division...transform MISC into a vertically integrated energy logistics solutions provider." Stock +2.0% at MYR8.98.

On April 16, MISC announced that it had entered into a Joint Venture Agreement (“JVA”) with Petromin PNG Shipping Limited (“PETROMIN”), a company incorporated in Papua New Guinea (“PNG”) to set up a joint venture company (“JVC”) the purpose of providing shipping solutions to meet the liquefied natural gas projects requirements and to also support other general shipping requirements of PNG. The JVC shall have an authorized share capital of USD10,000,000.00 comprised of 10,000,000 ordinary shares of USD1.00 each and paid-up capital of USD250,000.00 comprised of 250,000 ordinary shares of USD1.00 each. MISC shall hold 60% stake in the JVC, while PETROMIN shall hold the remaining 40%.