---
endpoint: analytics
pattern: Transport
status: done
latency_ms: 197843
conversation_id: 7af63ab3-4329-4546-ae73-cec47c79ebad
citations: 12
created: 2026-05-31 22:16:00Z
---

# What are the key risks to MISC’s growth trajectory?

# Key Risks to MISC Berhad's (3816 MK) Growth Trajectory

MISC is a Malaysian-listed maritime conglomerate (Petroliam Nasional / PETRONAS controls **51.0%**, EPF holds **12.9%**), structured across four operating segments. As of FY24, profit mix was **Petroleum 49% / LNG 38% / Offshore 8% / Heavy Engineering 5%** [7] — the trajectory of growth is therefore disproportionately exposed to LNG and petroleum shipping cycles plus offshore FPSO execution. The risk surface clusters into six categories.

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## 1. LNG Carrier Oversupply — The Single Biggest Near-Term Drag

Global LNG newbuild deliveries are running well ahead of demand absorption. CLSA flags **86 LNG carrier deliveries scheduled in 2025 versus 65 in 2023**, against a backdrop of "ample gas inventory" — keeping LNG charter rates stagnant into 2025 [2]. The pain is structural rather than transitory: when MISC's long-term LNG contracts roll off, vessels are pushed into a weak spot market. Management itself stated, "when our long-term charter contract expires...our vessels [are] forced to compete in the spot market, certainly spending [in] that's already a weak LNG market" [8].

The downstream financial consequence already materialized in 4Q24 — MISC booked **RM735.5m of impairment provisions plus RM241.1m of receivable impairments**, dragging the quarter into a headline loss of RM446.2m [4]. Management confirmed the RM735m impairment spans **~10 LNG vessels** (Puteri-class plus 3B+) whose value-in-use fell below market value as they entered the tail end of contracts [9]. Stripping the one-offs, full-year 2024 impairments leapt to **US$215m vs only US$58m in 2023** [10].

**Forward read:** If newbuild deliveries keep outpacing demand, value-in-use impairments can recur each time another tranche of older Puteri-class vessels approaches charter expiry.

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## 2. Offshore / FPSO Segment Execution and Earnings Cliff

The Offshore segment delivered the Mero-3 FPSO (Marechal Duque de Caxias) for Petrobras in late October 2024. While first oil is positive long-term, the segment **turned operating-loss-making in 4Q24** as construction-phase profit recognition rolled off, leaving the operations phase to absorb provisions [3]. Management quantified the swing: Offshore posted **a US$92m loss after tax in FY24 vs prior expectation** of ~US$50m profit ex-provisions [11].

CLSA explicitly lists execution risk as a key risk: "execution risks are also prevalent, especially in the group's new floating production storage and offloading bidding" [1]. The 2024 Mero-3 cycle showed how a single FPSO project's cost overruns and customer-side technical glitches (Petrobras delayed first oil 2–3 months [5]) can swing segmental P&L by hundreds of millions of ringgit.

**Forward read:** With Mero-3 now in operations and no new FPSO project visibly replacing the construction-phase contribution, **earnings continuity from Offshore depends entirely on winning the next contract** — which is paused (see Risk #3).

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## 3. Bumi Armada Merger — Self-Imposed Bidding Pause

MISC signed a non-binding MoU with Bumi Armada to explore a merger of FPSO businesses [12]. CLSA estimates the FPSO market has **10 awards expected in 2025 and 11 in 2026**, but "MISC will first prioritise the merger plan with Bumi Armada (currently still in the due diligence phase) before submitting new FPSO tender projects" [2].

This is a growth-trajectory risk in two ways:
- **Opportunity cost** — every quarter spent in due diligence is a tender cycle missed; competitors fill the orderbook gap.
- **Integration risk** — Bumi Armada carries its own balance sheet and legacy FPSO contracts; the merger ratio, governance structure, and combined leverage profile are all unresolved.

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## 4. Petroleum Tanker Cycle Reversal Risk

Petroleum is currently MISC's profit anchor — **49% of FY24 segment profit** [7] — buoyed by long-haul exports from the US, Brazil, and Guyana plus low fleet growth [5][2]. This is exactly the kind of cyclical strength that CLSA's risk section warns against: "the group's business model is highly susceptible to the vagaries of shipping market demand and supply dynamics as well as volatility in tanker rates" [1].

Two specific reversal triggers:
- **Tonne-mile demand normalization** — if Red Sea/Suez routings normalize or OPEC+ unwinds production cuts, the long-haul premium compresses.
- **Charter rate erosion** — CLSA noted in Aug-24 that "spot charter rates have tapered off from their peak, especially for LNG vessels" [6]; the same pattern could affect petroleum if newbuild orders catch up to demand.

The Petroleum segment is currently masking weakness in Gas and Offshore. A turn in tanker rates would expose the underlying group fragility.

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## 5. Cyclical Dependence on Brent and Charter-Rate Volatility

The investment thesis explicitly leans on "elevated Brent crude oil price...providing support to charter rates" — a thin defense if Brent reverts. Combined with management's own admission that profits decline because "older vessels...[face] lower utilization" and require either conversion to floating storage or layup [8], MISC has limited self-help levers when both rates and oil decline simultaneously.

Provisions discipline is also imperfect — the 4Q24 impairment was **not for one ship** but for a fleet of ~10 vessels [9], suggesting MISC's net book values had drifted materially above market across the older Puteri-class.

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## 6. Concentration & Governance Risk (PETRONAS as 51% parent)

Petroliam Nasional Bhd controls **51.0%** of MISC. While PETRONAS provides captive demand (the new ammonia dual-fuel Aframax tankers and recent LNG newbuild charters illustrate this), the same relationship constrains MISC's pricing power on intercompany charters and forces strategic decisions to align with PETRONAS Gas & Maritime division priorities. Capital allocation, dividend policy (FY24 dividend held flat at 36 sen — a **76% payout ratio** [4]), and ESG/decarbonization targets (50% GHG intensity reduction by 2030) are all set within that constraint.

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## Risk Summary Table

| # | Risk | Evidence | Estimated Magnitude |
|---|---|---|---|
| 1 | LNG vessel oversupply pushing spot rates down | 86 deliveries in 2025 vs 65 in 2023 [2]; ~10 vessels impaired [9] | High — recurring |
| 2 | Offshore segment earnings cliff post-Mero-3 | Offshore turned loss-making 4Q24 [3]; US$92m FY24 loss [11] | High — already realized |
| 3 | Bumi Armada merger pauses FPSO bidding | Tender pipeline 10 (2025) + 11 (2026) not being pursued [2][12] | Medium — opportunity cost |
| 4 | Petroleum tanker rate normalization | 49% profit weight [7]; rates already tapered from peak [6] | Medium — pending trigger |
| 5 | Provisions recurrence (value-in-use vs market) | US$215m impairments in FY24 vs US$58m in FY23 [10] | Medium — fleet-aging linked |
| 6 | PETRONAS concentration / governance | PETRONAS 51%, EPF 12.9% [4] | Low/structural |

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## Bottom Line

CLSA upgraded MISC to **Outperform with an RM8.25 target** in Feb 2025 [4], but the upgrade was driven by share price action (trough EV/EBITDA ~9.6x) rather than a clean bill of health on the risk surface. The base case requires that (a) the Petroleum segment continues to carry the group, (b) LNG charter rates bottom and re-rate from 2026, (c) the Bumi Armada merger concludes without value destruction, and (d) no further fleet impairments materialize. **A single shock to any of these — especially a tanker rate reversal — would significantly impair the growth trajectory.**

---

**Sources**
[1] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF
[2] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF
[3] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF
[4] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF
[5] CLSA — MISC HLD (Within estimates), 25 Aug 2024 — 607937237LinqAlpha.PDF
[6] CLSA — MISC HLD (Within estimates), 25 Aug 2024 — 607937237LinqAlpha.PDF
[7] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF
[8] MISC Berhad — Q4 2024 Earnings Call (Raja Azlan, CEO)
[9] MISC Berhad — Q4 2024 Earnings Call (Afendy, CFO — impairment scope)
[10] MISC Berhad — Q4 2024 Earnings Call (Raja Azlan, CEO — impairment quantum)
[11] MISC Berhad — Q4 2024 Earnings Call (Afendy, CFO — Offshore normalization)
[12] MISC Berhad — Q4 2024 Earnings Call (Raja Azlan, CEO — Bumi Armada MoU)

## Citations

- [1] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [2] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [3] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [4] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [5] **607937237LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/08/607937237LinqAlpha.PDF>
- [6] **607937237LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/08/607937237LinqAlpha.PDF>
- [7] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [8] **Q4 2024 MISC Berhad** · external
- [9] **Q4 2024 MISC Berhad** · external
- [10] **Q4 2024 MISC Berhad** · external
- [11] **Q4 2024 MISC Berhad** · external
- [12] **Q4 2024 MISC Berhad** · external

