PP 7767/09/2010(025354)

Malaysia Corporate Highlights

RHB 28
Research
June 2010
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New s Upda te
28 June 2010
MARKET DATELINE

MISC Share Price

Fair Value
:
:
RM8.70
RM8.02
Buying Four Suezmax Petroleum Tankers For Recom : Underperform
(Maintained)
RM880m

Table 1 : Investment Statistics (MISC; Code: 3816) Bloomberg: MISF MK

Net Net
FYE Turnover Profit# EPS# Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
Mar (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2010 13,775.1 703.3 18.2 (51.8) 47.8 - (110.4) 1.6 2.9 0.2 4.0
2011f 14,474.2 1,473.4 33.0 81.2 26.4 37.0 201.4 1.6 6.3 0.3 4.0
2012f 15,118.8 1,638.5 36.7 11.2 23.7 48.0 69.6 1.6 6.9 0.3 4.0
2013f 15,749.8 1,959.9 43.9 19.6 19.8 48.0 39.7 1.6 8.2 0.3 4.0
Main Market Listing /Trustee Stock/Syariah Approved Stock By The SC #Excluding EI * Consensus Based On IBES

♦ Four new Suezmax. MISC has placed an order for four new 158,500-dwt Issued Capital (m shares) 4,463.8
Suezmax petroleum tankers with Samsung Heavy Industries Co Ltd for Market Cap(RMm) 38,835.0
US$271.2m (RM880m) or US$67.8m (RM220m) each, to be delivered in Daily Trading Vol (m shs) 0.6
52wk Price Range (RM) 7.80-9.00
Apr-Oct 2012. These will be the first Suezmax-class petroleum tankers
Major Shareholders: (%)
owned by MISC, complementing its existing fleet comprising Aframax
Petronas 62.7
tankers and Very Large Crude Carriers (VLCC). MISC said that the new
EPF 11.0
Suezmax petroleum tankers will enable it “to deliver a more comprehensive PNB 8.4
global oil transportation services to its customers”.
FYE Mar FY11 FY12 FY13
♦ No issue. We have no issue with the latest move by MISC as it is in line EPS Revision (%) - - -
with MISC’s on-going efforts to grow and re-organise its petroleum tanker Var to Cons (%) -11 -24 -9
fleet. Ceteris paribus, the acquisition will raise MISC’s net debt and gearing
PE Band Chart
of RM4.9bn and 0.21x as at 31 Mar 2010 to RM5.8bn and 0.25x.

♦ Forecasts. Maintained as this, as mentioned, represents MISC’s on-going

efforts to grow and re-organise its petroleum tanker fleet. PER = 29x
PER = 22x
PER = 15x
♦ Risks to our view. The risks include: (1) An earlier-than-expected
recovery in the shipping sector; and (2) Lower-than-expected bunker cost.

♦ Maintain Underperform. The performance of MISC’s petroleum, chemical

and container shipping segments will continue to be weighed down by the
Relative Performance To FBM KLCI
subdued freight rates and volumes over the next 1-2 years on the back of
the double-whammy of overcapacity and slow demand on the back of a mild
recovery in the global economy. This eclipses MISC’s investment case FBM KLCI

based on the steady income stream from its LNG division and high growth
at its offshore & engineering businesses. Indicative fair value is RM8.02
based on “sum of parts” (see Table 2). MISC

Joshua CY Ng
Please read important disclosures at the end of this report. (603) 92802151
joshuang@rhb.com.my

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 1 of 3
available for download from www.rhbinvest.com
 28 June 2010

Table 2: Sum-Of-Parts Valuation For MISC

RMm RM/share Basis
LNG 18,248.2 4.09 DCF, WACC of 6.47%
Petroleum 7,989.1 1.79 1.5x book value
Chemical 2,583.4 0.58 1.5x book value
Liner 1,789.6 0.40 1.5x book value
Oil & Gas 10,129.1 2.27 16x 1-year forward earnings
40,739.4 9.13
Net debt (4,922.6) -1.10 As at 31 Mar 10
Fair value 35,816.8 8.02

Table 3: Earnings Forecasts Table 4: Forecast Assumptions

FYE Mar (RMm) FY10a FY11F FY12F FY13F FYE Mar FY11F FY12F FY13F

Turnover 13,775.1 14,474.2 15,118.8 15,749.8 LNG fleet size (units) 29 29 29

Turnover growth (%) (12.7) 5.1 4.5 4.2 Aframax/VLCC fleet size (units) 67 70 70

EBITDA 2,512.6 3,304.5 3,592.4 4,019.4

EBITDA margin (%) 18.2 22.8 23.8 25.5

Depreciation (1,246.0) (1,270.9) (1,296.3) (1,322.3)

Net Interest (366.9) (353.5) (430.6) (486.4)
Associates 33.4 35.0 35.0 35.0
EI (21.2) 0.0 0.0 0.0

Pretax Profit 911.9 1,715.1 1,900.5 2,245.7

Tax (89.7) (72.4) (75.8) (81.0)
PAT 822.2 1,642.7 1,824.7 2,164.7
Minorities (140.2) (169.3) (186.2) (204.9)
Net Profit 682.0 1,473.4 1,638.5 1,959.9
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions
and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to
opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an offer,
invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no
reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an
interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular
investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend
on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for any loss or
damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group
may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of
any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services
from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over
a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 2 of 3
available for download from www.rhbinvest.com
 28 June 2010
Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities,
subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 3 of 3
available for download from www.rhbinvest.com