Exit the liner business to cut MISC losses
MISC Bhd's decision to exit the liner (container) business will help minimise future losses for the company. To recap, the container division has been making losses since 2008, The Star reports.
Given the inability to stomach the high operating costs and also the rapid changes in global trade patterns, which had caused significant volatility, the company decided to exit this line of business in November 2011.
It is now in the midst of selling off its vessels, exiting trade lines and making the necessary impairments/provisions, which thus far has come up to around RM1.45bil. The company expects to complete the exercise by June, but all efforts are to accelerate the process.
The company is likely to see improvement in its liquified natural gas, offshore, heavy engineering and tank terminal divisions with the additional fleet and capacity expected from 2012.
However, we still foresee tough times for the company in the near term on account of the soft operating conditions of its petroleum and chemical segments. According to management, the outlook for the two divisions will continue to be challenging due to volatile charter rates, unyielding bunker costs and demand-supply vessel imbalances.
Just for an illustration, while the bunker costs have returned to its highs of US$750 per tonne (seen in mid-2008), the Baltic Dry Index is still at a low of 896 (versus the high of 8,000-9,000 in mid-2008).
We have increased our financial year ending Dec 31, 2012 (FY12) earnings per share by a marginal 3.5% as we assume slightly higher charter rates for the petroleum and chemical divisions based on the average rate earned for FY11.
We also introduce our FY13 and FY14 net profit estimates of RM1.1bil and RM1.35bil respectively. The improvements to our bottom line forecasts are based on lower pre-tax profit margin loss assumptions for both the petroleum and chemical divisions as we expect the demand-supply imbalances to slowly correct, and charter rates to grow 1.5% for all its vessel divisions.
We have also reduced our FY12 estimated dividend per share assumptions to 15 sen (from 35 sen previously) as we believe the company will look to conserve cash until better times. No dividends were paid in FY11.
Given the inability to stomach the high operating costs and also the rapid changes in global trade patterns, which had caused significant volatility, the company decided to exit this line of business in November 2011.
It is now in the midst of selling off its vessels, exiting trade lines and making the necessary impairments/provisions, which thus far has come up to around RM1.45bil. The company expects to complete the exercise by June, but all efforts are to accelerate the process.
The company is likely to see improvement in its liquified natural gas, offshore, heavy engineering and tank terminal divisions with the additional fleet and capacity expected from 2012.
However, we still foresee tough times for the company in the near term on account of the soft operating conditions of its petroleum and chemical segments. According to management, the outlook for the two divisions will continue to be challenging due to volatile charter rates, unyielding bunker costs and demand-supply vessel imbalances.
Just for an illustration, while the bunker costs have returned to its highs of US$750 per tonne (seen in mid-2008), the Baltic Dry Index is still at a low of 896 (versus the high of 8,000-9,000 in mid-2008).
We have increased our financial year ending Dec 31, 2012 (FY12) earnings per share by a marginal 3.5% as we assume slightly higher charter rates for the petroleum and chemical divisions based on the average rate earned for FY11.
We also introduce our FY13 and FY14 net profit estimates of RM1.1bil and RM1.35bil respectively. The improvements to our bottom line forecasts are based on lower pre-tax profit margin loss assumptions for both the petroleum and chemical divisions as we expect the demand-supply imbalances to slowly correct, and charter rates to grow 1.5% for all its vessel divisions.
We have also reduced our FY12 estimated dividend per share assumptions to 15 sen (from 35 sen previously) as we believe the company will look to conserve cash until better times. No dividends were paid in FY11.