Affin Hwang upgrades MISC, raises target to RM6.04

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KUALA LUMPUR (May 27): Affin Hwang Capital Research has upgraded its call on MISC Bhd with a higher target price as the research house expects a decent 4.6% dividend yield will support the counter moving forward.

"We upgrade the stock to a 'hold' as we believe the 4.6% dividend yield, on our estimates, would likely support the share price. We raise our 12-month target price to RM6.04 (from RM5.95) as we roll forward our valuation to 2020," wrote Affin Hwang analyst Tan Jianyuan in a note today.

He said the group's results for the first quarter ended March 31, 2019 (1QFY19) were within expectations, with core net profit of RM469 million, up 42% year-on-year.

Its revenue grew 13% year-on-year amid better contribution from the liquefied natural gas (LNG) and petroleum segments, supported by the addition of four new LNG vessels and higher petroleum tanker charter rates.

Looking ahead, however, the analyst warned that MISC's results may not be sustainable in the coming quarters amid rising bunker costs.

LNG tanker rates are also expected to remain lacklustre in the coming quarters.

"The LNG tanker rates trend has normalised back to 1Q18 levels, post the winter season. We expect rates to remain lacklustre in the coming quarters although the long-term outlook remains positive.

"Despite weaker petroleum tanker rates following the end of the winter season, they are still showing signs of improvement from 2018 due to slower fleet growth overall," said Tan.

At 10.07am, MISC rose 2.76% or 18 sen to RM6.70 with 43,900 shares done.