This article first appeared in The Edge Financial Daily on February 19, 2020
KUALA LUMPUR: MISC Bhd’s net profit fell 26.2% to RM249.9 million for the fourth quarter ended Dec 31, 2019 (4QFY19) from RM338.7 million a year ago on a lower share of profit of joint ventures and higher impairment of assets, coupled with recognition of a gain on acquisition of a business in 4QFY18.
This resulted in lower earnings per share of 5.6 sen for 4QFY19, compared with 7.6 sen for 4QFY18.
Revenue for 4QFY19 fell by a marginal 0.5% year-on-year to RM2.38 billion, from RM2.39 billion, on a lower number of operating vessels in its petroleum segment.
This was offset by an uplift in its liquefied natural gas (LNG) segment following redeployment of vessels previously under charter suspension, and acquisition of two LNG carriers in December 2018 and January 2019 respectively.
The group declared a fourth interim dividend of nine sen per share amounting to RM401.7 million, as well as a special dividend of three sen per share totalling RM133.9 million, for full FY19. Both are payable on March 17.
MISC president and group chief executive officer Yee Yang Chien attributed the special dividend to the group achieving a 36.1% increase in operating cash flow to RM5.58 billion in FY19 from RM4.1 billion in FY18.
“Taking into consideration our current capital commitments and foreseeable new investment opportunities, I am happy that we are able to return some surplus cash to our shareholders in the form of the special dividend that has been announced together with the quarterly dividend,” he said in a statement yesterday.
Net profit for full FY19, meanwhile, increased 8.8% to RM1.43 billion from RM1.31 billion for the previous year, while revenue grew 2.1% to RM8.96 billion from RM8.78 billion for FY18.
On prospects, MISC said the tanker market is widely expected to remain firm in 2020 due to fewer deliveries and growing long-haul prospects, as well as demand growth arising from the implementation of the International Maritime Organization’s 2020 sulphur cap.
“However, the recent Covid-19 outbreak has posed some risks to the oil and tanker markets, and while the impact is currently uncertain, the tanker market could face short-term headwinds if the outbreak is not contained or if the situation escalates,” it added.
For its LNG shipping segment, liquefaction expansion in North America and the Middle East is expected to lead to an increase in requirement for vessels and this should support charter rates going forward.
Nonetheless, MISC said the group’s present portfolio of long-term charters will underwrite the steady performance of MISC’s LNG business segment, and the two long-term contracts secured in 4QFY19 will provide growth in future years.
“The resurgence of offshore oil and gas (O&G) projects is set to continue its upward trajectory in 2020, with oil prices remaining relatively stable. The floating production system market will likely remain robust, with an increasing number of contract awards in the next few years, and MISC’s offshore business unit will continue to assess the merit of pursuing these opportunities.
“And while there is an increase in offshore activities, the heavy engineering segment remains prudent on the outlook for its business in the near term amid uncertainties over the timing of capital spending by major O&G players,” it said.
“Notwithstanding, the heavy engineering segment remains committed to replenishing its order book by expanding its footprint in various geographical areas and diversifying into new business opportunities,” it added.