---
endpoint: analytics
pattern: Transport
status: done
latency_ms: 256365
conversation_id: c173a96a-81d6-4592-a536-cabf44a0a8c5
citations: 5
created: 2026-05-31 19:44:46Z
---

# What is the investment thesis for MISC in the current market environment?

# MISC Berhad (MISC MK / KLSE) — Investment Thesis in the Current Market Environment

**Sector**: Transportation / Shipping & Offshore — Malaysia | **Market Cap**: ~US$7.2bn | **Major shareholders**: Petroliam Nasional Bhd 51.0%, EPF 12.9% [10]

---

## 1. Core Thesis (CLSA Internal View — Latest Available)

CLSA's most recent dedicated single-name note (Abdul Hadi Manaf, **23 Feb 2025**) upgrades MISC from **Hold → Outperform (O-PF)** with an unchanged SOTP-derived target price of **RM8.25** (~+15% upside at the time) — the upgrade is anchored on **share-price action that pushed MISC to a trough valuation of ~9.6x EV/EBITDA, roughly -1 standard deviation below the long-run 18.4x mean** [4]. In the latest Malaysia strategy (CLSA, **9 Jun 2025**), MISC remains a **conviction top pick alongside CIMB and Tenaga** [11].

### The two-line thesis as written by CLSA:

> *"Stable earnings from long term charter contracts and lack of carriers available in the market. Elevated Brent crude oil price should also provide support to charter rates."* [1]

### Why the market is paying us to wait

- **Dividend yield acts as a floor**: 6.3–6.7% forecast yield 2025–27, with a 76% payout ratio on FY24 (full-year DPS 36 sen) — yield is the explicit pillar of the RM8.25 SOTP value [8].
- **Trough multiple + 139% EPS rebound forecast 2025**: CLSA models EPS recovering from RM0.27 in 2024 (depressed by lumpy provisions) to RM0.64 in 2025 (+139.3% YoY), then plateauing at RM0.63–0.65 through 2027 — the snap-back is mechanical (no 2024 impairments repeating) rather than a cyclical thesis [8].
- **PB at 0.8x with a 7%+ ROE recovery** — a low-volatility "yield + asset value" setup rather than a high-beta cyclical [8].

---

## 2. Segmental Engine — What Actually Drives the P&L

MISC is a four-segment business; the profit mix matters more than headline revenue:

| Segment | 2024 Revenue Mix | 2024 Op Profit Mix | Current Outlook |
|---|---|---|---|
| Petroleum & Products | 38% | **49%** | Tanker rates "broadly positive" for 2026 — sanctions + OPEC+ supply shifts driving tonne-mile demand; expanding contract portfolio [14] |
| LNG (Gas Assets & Solutions) | 22% | 38% | Charter rates expected to "gradually improve in 2026" as global liquefaction capacity rebalances supply; steam-turbine vessels still subdued [13] |
| Offshore (FPSO) | 12% | 8% | FPSO Mero-3 transitioning to operational phase; deepwater/FPSO momentum in South America and Asia-Pacific [15] |
| Heavy Engineering (MMHE) | 28% | 5% | Volatile — geopolitical/tariff overhang; orderbook replenishment underway |

**Net read-across:** The petroleum tanker segment (already the largest profit pool) is the cyclical earner currently providing support; LNG (the "stable charter contract" pillar) is bottoming after 2024 oversupply; Offshore is the growth lever via Mero-3 contribution; Heavy Engineering remains a small but volatile drag.

---

## 3. Confirming Read-Through from Latest Filings (FY2025 — Reported)

MISC has now reported full-year 2025 results, which broadly **vindicate** the CLSA thesis:

- **FY2025 Group operating profit RM2,776.5m (+7.0% YoY)** despite FY revenue falling 15.8% to RM11.15bn — proof that the **offshore transition + petroleum recovery offset the LNG/Heavy Engineering drags** [16].
- **Q4 2025 specifically**: Offshore segment swung from a RM135m operating loss (Q4 2024) to a **RM177.9m operating profit** — the largest single QoQ delta — driven by **FPSO transition from construction to operational phase plus an FSO insurance recovery** [15].
- **Petroleum & Products Q4 2025 op profit RM391.6m** (+11.3% YoY) — confirming tanker-rate strength [15].
- **Operating cash flow surged 31.8% YoY to RM5.64bn** — supports continued dividend capacity and balance-sheet de-gearing [17].
- Management 2026 guidance explicitly: **LNG rates to "gradually improve"**, **petroleum tanker rates to "remain firm"**, **offshore market "supported by favourable industry outlook"** [13][14].

This is the **textbook scenario** the CLSA thesis was set up for — the depressed 2024 base year now looks like the trough.

---

## 4. Key Catalysts (per CLSA)

- **FPSO Mero-3** delivery (mid-2024) ramping into full operational contribution — now visible in FY2025 numbers [2][15].
- **New FPSO contract wins** to replenish the offshore orderbook [2].
- **Bumi Armada (BAB) merger** — currently in due diligence; **CLSA explicitly notes that if the merger is *called off*, "the market will be relieved"** — i.e., investors view BAB integration as a *negative* overhang, not a catalyst [11].
- 31 Jan 2025: MISC consolidated control of FPSO Kikeh (acquired SBM's 49% stake) and divested its 49% in FPSO Espirito Santo — a portfolio rationalization that simplifies the offshore book.

---

## 5. SOTP Valuation Architecture (CLSA, RM8.25/share)

| Component | Value (RM/share) | Methodology |
|---|---|---|
| LNG Shipping (existing fleet + recent wins) | 5.40 | 10.1x EV/EBITDA + DCF on contract wins |
| Petroleum Shipping (existing + shuttle tankers) | 3.25 | Market value + DCF |
| Offshore (existing fleet + Mero-3 50% stake) | 2.06 | 10.1x EV/EBITDA + DCF |
| Heavy Engineering (MMHE 66.5% stake) | 0.18 | Consensus value |
| Bintulu Port stake (2.3%) | 0.01 | Mkt cap |
| **Gross value** | **10.91** | |
| Less: FY25F net debt | (2.63) | |
| Less: minority interest | (0.07) | |
| **SOTP equity value** | **RM8.25** | |

Source: CLSA SOTP build [9]

---

## 6. Financial Snapshot (CLSA Forecasts)

| (RMm) | 2023A | 2024A | 2025CL | 2026CL | 2027CL |
|---|---|---|---|---|---|
| Revenue | 14,272 | 13,238 | 13,031 | 12,824 | 12,865 |
| Net profit | 2,124 | 1,194 | 2,856 | 2,839 | 2,902 |
| EPS (sen) | 47.6 | 26.7 | 64.0 | 63.6 | 65.0 |
| EPS growth (%) | 37.8 | (43.8) | **139.3** | (0.6) | 2.2 |
| PE (x) | 15.0 | 26.7 | **11.2** | 11.2 | 11.0 |
| Dividend yield (%) | 4.2 | 5.0 | **6.7** | 6.6 | 6.6 |
| FCF yield (%) | 11.0 | (1.7) | **9.6** | 10.7 | 10.7 |
| ROE (%) | 5.5 | 3.1 | 7.3 | 7.1 | 7.1 |
| Net debt/equity (%) | 24.6 | 30.2 | 27.4 | 23.8 | 20.3 |

Source: CLSA [8]

FY2024 backdrop that set up the upgrade: **Core profit RM2.1bn (-7.4% YoY)**, dragged by a **RM446m headline 4Q24 loss** after **RM735.5m impairment provisions** on the gas segment plus **RM241m receivables impairment** — i.e., **non-recurring** items masked underlying performance [7][6].

---

## 7. Risks to the Thesis

- **Shipping cyclicality** — fundamental demand/supply volatility in tanker and LNG markets [3].
- **FPSO execution risk** — bidding and project delivery risk on new offshore tenders [3].
- **LNG carrier oversupply tail** — 2025 saw 86 new LNGC deliveries (vs. 65 in 2023), still pressuring legacy steam-turbine vessels into 2026 [5][13].
- **Bumi Armada deal overhang** — until merger clarity, FPSO tender pipeline is on hold; market wants the deal *off the table* [5][11].
- **Recurring impairments** — Q4 2025 still booked RM356.4m in impairment provisions; the "clean" 2024 base assumption needs monitoring.
- **Tax exemption sunset** — 100% shipping tax exemption extended to YA 2026; renewal beyond that is a policy risk.

---

## 8. External Validation (Sell-Side Read)

- **28 Apr 2026**: AmInvestment Bank upgraded MISC to **Buy from Hold** (share price RM8.03 at the time) — directionally aligned with the CLSA upgrade thesis a year earlier.
- **13 May 2026**: Chairman Abu Huraira bin Abu Yazid retired — governance reshuffle, not a thesis-disrupting event.

---

## Bottom Line

MISC is a **trough-multiple, high-yield, low-PB Malaysian transport asset** with three concurrent tailwinds: (i) petroleum tanker rates firm into 2026 on sanctions/OPEC+ tonne-mile dynamics, (ii) LNG rates bottoming and set to gradually improve as global liquefaction capacity catches up with deliveries, and (iii) FPSO Mero-3 contribution now flowing through the P&L — collectively driving a **139% reported EPS rebound** in 2025 vs. the impairment-distorted 2024 base. The combination of a **6.6–6.7% sustainable dividend yield**, **~9.6x EV/EBITDA at -1SD vs. history**, and **0.8x PB** provides what CLSA characterizes as a margin-of-safety setup. The principal idiosyncratic risk is **Bumi Armada merger execution** — and notably, the consensus view is that the *cancellation* of that deal would be a *positive* catalyst, not the consummation. CLSA classifies MISC as one of its **top three Malaysia picks** at the latest read [11][12], and recent reported FY2025 results have broadly **confirmed the thesis trajectory**.

---

**Sources**
[1] Investment thesis — MISC O-PF (Masked by provisions), CLSA, 23 Feb 2025
[2] Catalysts (Mero-3 / new contracts) — same report
[3] Investment risks — same report
[4] Upgrade rating to O-PF rationale, trough valuation — same report
[5] Charter rates outlook (gas vs petroleum, Bumi Armada) — same report
[6] Weaker gas/offshore but petroleum improvement — same report
[7] 4Q24 results recap — same report
[8] Financial summary table 2023A–2027CL — same report
[9] SOTP-derived target price table — same report
[10] Pricing/major shareholders header — same report
[11] Top picks comment (MISC, TNB, CIMB; Bumi Armada read) — Malaysia strategy (1Q25 results: outlook not as dire), CLSA, 9 Jun 2025
[12] Top picks comp sheet — same report
[13] FY2025 prospects — LNG outlook — MISC Quarterly Report Q4 FY2025
[14] FY2025 prospects — Petroleum & Products + Offshore outlook — same report
[15] Q4 2025 segmental performance (Offshore swing, Petroleum +11.3%) — same report
[16] FY2025 group operating profit +7.0% YoY — same report
[17] FY2025 operating cash flow +31.8% — same report

## Citations

- [13] **MISC Quarterly Report_Q4 FY2025** · external
- [14] **MISC Quarterly Report_Q4 FY2025** · external
- [15] **MISC Quarterly Report_Q4 FY2025** · external
- [16] **MISC Quarterly Report_Q4 FY2025** · external
- [17] **MISC Quarterly Report_Q4 FY2025** · external

