Saturday February 2, 2013

MISC buyout by Petronas isn’t great for longer-term investors

PETALING JAYA: Petroliam Nasional Bhd's (Petronas) proposed buyout offer of RM5.30 per MISC Bhd share is likely disappointing to some minority shareholders who may have been hoping to benefit from the recovering shipping wave.

Some analysts are questioning Petronas' intention of privatising MISC when the latter is turning around, albeit within a longer-term horizon. It is also coming close on the recent C$5.2bil (RM16.16bil) takeover of Canada-listed Progress Energy Resources Corp by Petronas.

“Investors with a longer time horizon who had recently accumulated MISC at attractive valuations would likely be disappointed that they would not be able to ride an eventual shipping upturn via MISC in the years ahead,” CIMB Research said in a note.

MISC returned to the black in the second quarter ended June 30, 2012 after two consecutive quarters of losses due to provisions for the planned cessation of its problematic liner-related business that is suffering from an overcapacity of vessel supply.

The company's net profit rose 209% to RM380.95mil in the quarter on revenue of RM2.49bil.

The liner exit marked the shipping company's renewed focus on energy transportation and logistics businesses, which include its stable-income segments such as liquefied natural gas shipping, offshore and tank terminal.

“If we did not exit the liner business, it would negatively impact MISC as a whole and we are not prepared to allow that to happen,” MISC president and chief executive officer Datuk Nasarudin Md Idris told StarBizWeek in July last year.

Analysts also believe that the offer price of RM5.30 should be higher.

“Our sum-of-parts (SOP) calculation for MISC is RM6.20, so RM5.30 is not all that fair,” and analyst said.

CIMB, meanwhile, said although the offer price was below MISC's SOP of RM6.17, it believed that minority shareholders would accept the offer, given that the weak tanker shipping markets were expected to keep the share price low over the next one to two years.

Another analyst also said Petronas' buyout of MISC did provide a decent exit for shorter-term investors who should be able to benefit from immediate share price upside.

The RM5.30 offer price works out to a premium of 18.04% or 81 sen above MISC's closing price of RM4.49 on Wednesday, the day before the offer was announced.

Petronas, which has a 62.27% stake in MISC, intends to take the company private.

MISC's share price has remained lacklustre in recent years. It hit a high of RM9.94 on Dec 6, 2007 and a nine-year low of RM3.87 on June 5 last year.

The buyout, if successful, will remove the nearly RM20bil company in market capitalisation from Bursa Malaysia, making it one of the largest privatisation deals in recent times.

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