HLIB Research

PP 9484/12/2012 (031413)

MISC (HOLD , EPS )
NEWSBREAK INDUSTRY: NEUTRAL

4 February 2013 Price Target: RM5.30 () Share price: RM4.45 Daniel Wong kkwong@hlib.hongleong.com.my (603) 2168 1077 KLCI Expected share price return Expected dividend return Expected total return Share price
(RM) 6.0
MISC (LHS) KLCI (RHS)

Privatization
News

 Major shareholder (62.67%) Petronas has offered to privatize MISC at RM5.30/share (+19.1% premium to last traded price of RM4.45 on 31 Jan 2013). Petronas is expected to fork out RM8.83bn for the remaining shares it does not own.  MISC other substantial shareholders are EPF at 9.66% and SASB (Skim Amanah Saham Bumiputra) at 6.35%.  However, Petronas clarified that it does not intend to privatize MMHE, a 66.5% owned subsidiary of MISC.  None.  MISC plays an integral role in supporting Petronas’s integrated oil & gas business activities (LNG shipping, offshore supports and etc). MISC had undergone various restructuring exercises since its listing back in 1983, and currently facing setbacks (on global economy uncertainty).  MISC share price had been punished severely from high of RM8.50 (Aug 2010) to RM4.00 before rebounded back to RM4.50 level, as investors continued to see uncertainties surrounding MISC, especially on its Petroleum, Chemical and Container (disposed in 2012) shipping divisions.  We believe that Petronas will have better control in restructuring the shipping conglomerate (post privatization), and expect potential re-listing of a leaner structure shipping conglomerate in the future (fetch better valuation).  We advise shareholders to take the offer of RM5.30/share (share price had been staying below this level since midApril 2012), as we do not expect share price to recover back to RM5.30 level in the near term, given continued oversupply concern on Petroleum and Chemical shipping industries, while USA is exploring the development of shale oil and gas (reducing the demand for petroleum shipping).  Continued oversupply of petroleum and chemical ships, depressing charter rates further.  Increased in bunker cost.  Slow recovery of global economy.  Unchanged. Hold   Positives –  Potential synergy from VTTI.  Stronger earnings post disposal of container division.  Negatives –  Slow down global economy growth.  Continued oversupply of tankers, pressuring freight rates.  Maintained hold with higher target price of RM5.30, based on offered price.

1628 19.1% 2.2% 21.3%

(KLCI) 1700 1680 1660 1640 1620 1600 1580 1560 1540 1520 1500

Financial Impacts Comments

5.5 5.0 4.5 4.0 3.5 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12

Information Bloomberg Ticker Bursa Code Issued Shares (m) Market cap (RM m) 3-mth avg. volume (‘000) Price Performance Absolute Relative Major shareholders Petronas EPF SASB 1M 8.5 12.6

MISC MK 3816 4,464 19,864 1,292 3M 12M 2.8 -26.4 5.8 -31.2

62.7% 9.7% 6.4%

Risks

Forecasts Rating

Summary Earnings Table FYE Mar (RM m) 9M11A* 2012E 2013E 2014E Turnover 11,341 9,381 9,571 10,252 EBITDA 2,007 2,256 2,893 3,067 Pre-tax Profit -1,629 805 1,479 1,733 Rpt. net profit -1,975 534 1,058 1,248 Norm. net profit 363 534 1,058 1,248 Rpt. EPS (sen) -44.3 12.0 23.7 28.0 Norm. EPS (sen) 8.1 12.0 23.7 28.0 P/E (x) 54.7 37.2 18.8 15.9 Book Value (RM) 4.71 4.73 4.86 5.04 P/B (x) 0.9 0.9 0.9 0.9 Net Dvd Yield (%) 0.0 2.5 2.5 2.5 Net Gearing (%) 51.4 56.3 69.6 62.6 ROE (%) 1.69 2.55 4.94 5.64 ROA (%) 0.9 1.3 2.6 3.1 HLIB * Annualized 9MFY12/11E for comparison

Valuation

Page 1 of 3

4 February 2013

256 2.3 12.562 356 -12.3 25 5.3 -0.849 3.353 -1.903 3.381 9.com Financial Projections Income statement FYE 31 Dec (RMm) FY03/11A 9M2011A FY12/12E FY12/13E FY12/14E Revenue 12.5 -68.9 0.252 Operating cost -9.501 1.125 -6.3 24.148 27.244 1.063 1.016 -3.8 10 2.5 46.903 27.256 -418 -998 -89 0 752 -2.731 21.938 6.464 17.871 -1.353 4.2 5.479 1.953 2.7 15.4 34.860 -8.876 -3.880 520 -1.791 Interest income 150 86 23 26 29 Interest expense -347 -280 -441 -408 -378 Associates 160 181 250 279 291 Exceptionals -3.330 1.248 Normalized net profit 1.0 -31.506 2.991 -197 -301 -17 -241 2.3 72.677 -7.2 51.5 70.0 13.524 308 0 0 PBT LNG 1.509 4.235 -4.4 -17.008 -88 -1.9 -0.244 -1.864 -10.645 -5.1 6.248 Basic shares (m) 4.856 345 2.0 28.9 -0. FD EPS (sen) PER (x) FD PER (x) Net DPS (sen) Net DY (%) BV/ share (sen) P/BPS (x) FCF/ share (sen) FCF yield (%) Market capitalization Net cash Enterprise value EV/ EBITDA (x) ROE (%) Other Ratios FYE 31 Dec (%) Growth (%) Sales Growth EBITDA Growth EBIT Growth PBT Growth Net Profit Growth Margins (%) EBITDA Margin EBIT Margin PBT Margin Net Profit Margin Net Debt/Equity (%) FY03/11A 9M2011A FY12/12E FY12/13E FY12/14E 2.864 -12.9 10 2.122 Offshores 681 610 771 810 850 Heavy Engineering 3.0 13.864 -9.886 -4.283 -1.319 273 534 1.893 -381 -239 -148 0 2.739 404 -7.6 9.008 21.6 -79.648 435 -10.050 -4.247 -10.276 EBIT 1.1 19.1 13. basic EPS (sen) Norm.2 29.9 -0.045 1.7 28.625 0 -2.200 2.1 2.593 359 -9.113 3.099 330 937 FY03/11A 9M2011A FY12/12E FY12/13E FY12/14E FY03/11A 9M2011A FY12/12E FY12/13E FY12/14E 26.155 1.6 23.824 21.034 1.067 -349 92 -173 0 2.824 10.125 6.349 6.2 5.9 28.7 69.456 0 -602 0 -546 0 0 -2.058 1.819 4.0 Normalized EPS (sen) 29.2 6.5 -0.730 544 973 1.0 6.328 1.5 5.6 35.2 16.148 28.185 EBITDA 2.6 18.0 7.0 23.0 0. basic EPS (sen) Norm.113 7.464 4.0 4.464 16.860 -6.013 6.909 3.096 4.HLIB Research | MISC www.237 -5.359 1.125 -500 1.7 0.235 0 -2.901 19.3 7.208 -1.5 -0.312 -1.464 4.148 41.631 2.7 0.9 1.096 Chemicals 770 724 948 1.464 4.756 6.1 62.6 4.3 14.150 2.326 8.4 83.545 1.1 72.1 12.320 2.4 -12.310 520 -1.050 -3.824 2.860 -7.1 19.183 2.2 62.914 -3.335 -7.755 436 -1.448 1.8 -33.2 6.464 Reported EPS (sen) 41.155 -5.1 19.hlebroking.9 0.571 10.091 1.630 -5.684 Petroleum Tankers 2.7 4.526 1.339 334 -10.0 Balance sheet FYE 31 Dec (RMm) Fixed assets Other long-term assets Other short-term assets Working capital Receivables Payables Inventory Net cash Cash ST debt LT debt Shareholders' funds Share capital Reserves Minorities Other liabilities Cashflow FYE 31 Dec (RMm) EBITDA Net interest received Working cap changes Taxation Others Operating cashflow Capex & acquisitions Free cashflow Other inv cashflow New borrowings Share issuance Dividends paid Other fin cashflow Forex Translation Net cashflow Beginning Cash Ending Cash Valuation ratios FYE 31 Dec (RMm) Rep.646 -2.0 15.0 23.0 37.3 5.481 534 1.8 18.1 19.077 0 -546 0 0 -999 345 330 3.604 1.5 15.464 17.411 640 -701 0 -1.893 3.000 -7.543 0 -97 -4.2 4.903 14.0 54.3 24.0 28.5 0.747 22.495 28.708 4.1 19.961 2.2 10 2.5 16.464 16.961 30.9 0.2 4.716 2.037 4.2 17.464 18.154 0 0 0 Pretax profit 2.333 21.155 2.557 Petroleum Tankers -147 -482 -542 -579 -520 Chemicals -177 -186 -253 -217 -128 Offshores 335 275 370 389 408 Heavy Engineering 424 251 323 330 375 Liner -578 -577 -536 0 0 Terminal 52 65 100 129 141 FY03/11A 9M2011A FY12/12E FY12/13E FY12/14E -10.171 2.464 4.3 12.371 6.234 9.991 1.189 2.2 12.506 -193 1.353 1.2 -33.9 0.5 11.453 1.3 17.039 31.632 1.8 98.4 0.7 -68.411 0 875 0 0 0 65 -4.039 2.0 12.020 1.654 2.589 520 -1.3 2.0 15.7 23.009 4.060 520 -2.058 1.500 Liner 2.0 10.7 28.912 4.9 0 0.289 6.637 -500 2.9 30.864 -10.0 -49.733 Taxation -17 -88 -89 -148 -173 Minorities -357 -171 -183 -273 -312 Reported net profit 1.067 Depreciation -1.037 29.544 6.6 Assumption Metrics FYE 31 Dec (RMm) FY03/11A 9M2011A FY12/12E FY12/13E FY12/14E Revenue LNG 2.222 805 1.443 1.137 0 -492 0 -546 0 0 1.7 18.370 29.370 3.766 9.0 56.6 7.4 8.581 1.6 Page 2 of 3 4 February 2013 .148 28.860 -8.488 2.6 5.864 -7.261 -961 -1.506 9.

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