KUALA LUMPUR (April 22): HwangDBS Vickers Rsearch said the failed takeover of MISC Bhd by Petronas shows that there is greater value to be unlocked in the shipping corporation.

In a research note, the research house said: “This episode tells us that Petronas believes there is greater value to be unlocked in MISC, dissenting minorities look beyond the current weakness in petroleum and chemical tanker rates and they believe there is greater value from the offer price.”

HwangDBS noted that Petronas’ final offer price of RM5.50 was below the Independent Adviser’s fair value range of RM5.69 to RM6.10 and HwangDBS’ target price (TP) of RM6.60.

The research house said catalysts for the stock include MISC’s new LNG vessel capex plan, stronger than expected Gumusut-Kakap earnings and earlier recovery of petroleum and chemical tanker rates.

Recommending a “buy” rating with TP of RM6.60, HwangDBS noted the stock is at a multi-year low.

It added that unsuccessful privatisation offer of RM5.50 per share sets the base value for the stock.

The share price of MISC, which had risen by about RM1 after the privatisation offer was made, plunged today on the failed takeover. At noon break, it was down 63 sen or 12% at RM4.67.

Daniel Wong, analyst of Hong Leong IB Research, said although there is a sell-down today due to knee-jerk reaction, he does not expect share price to fall back to below RM4.50 level.

The analyst has maintained his “hold’ rating on the stock, but with TP cut to RM5.20 from RM5.30.

Stating that the failed privatisation has no impact on the financials of MISC, Wong said in his note:

“We expect MISC earnings continued to be dragged down by petroleum and chemical tanker divisions, as both the markets are facing oversupply situations, with subdued demand growth.

“The recent bunker price’ decline to US$630/tonne from a high of US$780/tonne would provide comfort to MISC earnings, as bunker cost contributed 22% to MISC’s operating cost.”

Meanwhile, Maybank IB Research is also maintaining its TP of RM5.30 and “hold” rating on MISC.

“The worst appears to be over for the group operationally but earnings are still subject to much volatility, given prevailing uncertainties in the global environment,” it said in a research note.

“The chemical and petroleum divisions are likely to remain in the red in FY13 and while we expect stronger earnings in FY14 on a recovery in shipping rates, valuations are still not enticing at this stage,” it added.