---
endpoint: analytics
pattern: Transport
status: done
latency_ms: 175703
conversation_id: d017a699-f0ba-446a-ab94-30dd4e97dbe8
citations: 12
created: 2026-05-31 22:17:06Z
---

# What’s the bull case bear case for MISC?

# MISC Bhd (MISC MK) — Bull Case / Bear Case

**Context (CLSA coverage, lead analyst Abdul Hadi Manaf)**: Outperform (upgraded from Hold in Feb-2025), SOTP-derived target price RM8.25 (~+15% upside from RM7.18 priced 21-Feb-2025), 6.7% FY25E dividend yield. Market cap US$7.2bn; major holders Petronas 51.0%, EPF 12.9% [10]. The business is a four-segment marine-energy platform — Petroleum 49% / LNG 38% / Offshore (FPSO) 8% / Heavy Engineering 5% of 2024 segmental profit.

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## Bull Case

**1. Petroleum shipping the bright spot — tonne-mile demand intact, supply discipline holds.** "Average tanker rates continuing to be positive supported by high tonne-mile demand from continuous vessel rerouting coupled with minimal fleet expansion" [1]. The petroleum division was the swing factor that mitigated 2024 weakness — operating profit RM1.48bn (+9.3% YoY) versus LNG -33.4% and Offshore -92.1% [12].

**2. Long-duration charter book provides earnings annuity.** Investment thesis explicitly highlights "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" [2].

**3. 2025 earnings inflection — provisions normalizing.** 2024 was depressed by RM735.5m gas-segment impairments and RM241.1m receivables impairment; ex-provisions core profit was RM2.1bn [6]. CLSA models net profit rebound to **RM2.86bn in 2025CL (+139.3% YoY)**, EPS 64.0 sen, ROE re-rating from 3.1% → 7.3%, and Ebit margin expanding from 19.6% → 25.3% [8].

**4. Trough valuation supports re-rating.** "MISC… is now trading near a trough valuation of 9.6x or -1 std. below its average of 18.4x" — the basis for CLSA's Hold-to-Outperform upgrade [5]. FY25E PE 11.2x, PB 0.8x.

**5. Strong dividend coverage / yield support.** 2024 DPS held flat at 36 sen (76% payout); 2025CL DPS forecast at 48 sen for a 6.7% yield, and FCF yield re-rates back to 9.6% [8].

**6. FPSO pipeline visibility.** "The FPSO market is still vibrant with 10 FPSO awards expected in 2025 (2026: 11)" [1]. Mero 3 FPSO delivery is the named near-term catalyst — "earnings potential from FPSO Mero-3… The company also actively bidding for new contracts to replenish its orderbook" [4].

**7. SOTP cushion.** Sum-of-the-parts builds to **RM10.91/share gross (RM8.25 post net-debt & MI)** — LNG RM5.40 + Petroleum RM3.25 + Offshore RM2.06 + Heavy Engineering RM0.18 [9]. The fleet is valued at ~10.1x EV/Ebitda (in line with mean) plus DCF for recent contract wins / shuttle tankers / Mero 3.

**8. Capital structure improving.** Net debt/equity steps down from 30.2% (2024) → 27.4% (2025E) → 20.3% (2027E) as the capex cycle peaks and FCF turns positive (RM3.07bn in 2025E vs -RM556m in 2024) [11].

**9. Bumi Armada merger as strategic re-rating optionality.** "Talks on the merger with Bumi Armada are ongoing" [1] — potential offshore-segment scale benefits, though near-term it freezes new FPSO tendering.

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## Bear Case

**1. LNG shipping oversupply — the segment that was the historic backbone is structurally soft.** "Charter rates for gas vessels will likely remain stagnant with higher deliveries of LNG carriers (86 versus 65 in 2023) while gas inventory was still ample" [1]. LNG operating profit collapsed 33.4% YoY in 2024 [12], and the 4Q24 impairment cycle was triggered by the same dynamic — "MISC had to book impairment provisions for the gas segment in view of the influx of gas vessel supply in the market while demand remained relatively weak" [7].

**2. 2024 was a structural miss, not a one-off.** Headline 4Q24 was a RM446m loss (vs RM627m profit in 3Q24); core profit RM544m (-21% YoY). Full-year core profit RM2.1bn missed consensus by 16% [6]. Quarterly core profit collapsed to RM30m / 1% margin in 4Q24 — the worst print since at least 1Q18.

**3. Top-line declining for multiple years.** Revenue -7.2% in 2024, then -1.6% in both 2025E and 2026E, +0.3% in 2027E [8]. The 2025 earnings rebound is essentially a margin-mix story (provisions absent), not a growth story.

**4. EVA persistently negative — destroying value.** ROIC of 4.9% (2024) sits well below WACC of 9.3% — EVA/IC of -4.3% implying RM2.19bn of value destruction in 2024 alone; even on CLSA forecasts EVA stays negative through 2027 (-RM1.52bn) [11].

**5. Offshore execution risk crystallized.** "The offshore segment turned red in 4Q24 following the delivery of Mero 3 FPSO" [7] — offshore segment operating profit -92.1% YoY for 2024 [12]. The same Mero 3 that is the bull case "catalyst" has near-term been a drag, raising questions on margin ramp / commissioning provisions.

**6. Cyclicality + execution risk are the named risks.** "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. Execution risks are also prevalent, especially in the group's new floating production storage and offloading bidding" [3].

**7. Working capital absorption shock.** Operating cash flow collapsed from RM5.7bn (2023) → RM1.4bn (2024), driven by RM3.74bn working-capital outflow. FCF turned negative -RM556m; net debt rose to RM11.98bn from RM9.81bn [8].

**8. Dividend math stretched in 2024.** 2024 payout ratio was 134.6% of net profit (since headline EPS dropped 43.8%) [11]. Sustainability of the 36 sen DPS depended on the core, not headline, earnings — leaving a thinner cushion if 2025 disappoints.

**9. Bumi Armada merger holds back new FPSO bidding.** "We believe MISC will first prioritise the merger plan with Bumi Armada (currently still in the due diligence phase), before submitting new FPSO tender projects" [1] — i.e., MISC may miss part of the 2025 award window cited as a bull catalyst.

**10. Weak relative performance / low float.** Free float ~15.8%, 3M ADV only US$3.2m — limits institutional positioning. 12M absolute return -5.3%, -7.6% relative [10].

**11. Peer comp shows MISC at premium to shipping peers.** FY25 PE 11.2x is well above the global shipping peer median 5.0x (AP Moller 19.5x, Cosco 4.7x, Evergreen 3.3x, MOL 5.4x, Yang Ming 3.9x); the bull thesis on dividend yield (6.7% vs peer median 6.2%) is offset by below-median ROE (7.3% vs 11.3% median) [9].

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## Verdict (CLSA framing as of the 23-Feb-2025 note)

CLSA's stance is **mildly constructive (O-PF)** rather than high-conviction — the upgrade is grounded in (a) trough multiples after a -6.2% YTD share-price reset, (b) a defensible 6.7% dividend yield, and (c) the 2025 reset off depressed 2024 provisions [5]. The thesis is best characterized as **"yield + cycle-trough valuation"** rather than **"earnings growth re-rating"** — net profit growth ex-2025 base effect is essentially flat (-0.6% in 2026, +2.2% in 2027) and revenue is in mild decline through the forecast horizon. Bumi Armada merger is the under-priced optionality.

---

**Sources**
[1] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — 607951336LinqAlpha.PDF (Petroleum & FPSO outlook, p3)
[2] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — Investment thesis section
[3] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — Investment risks section
[4] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — Catalysts section
[5] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — Upgrade rationale / trough valuation
[6] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — 4Q24 results / provisions detail
[7] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — Segment commentary (gas, offshore, petroleum)
[8] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — Financials at a glance table
[9] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — SOTP / Peer comparison
[10] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — Stock data / shareholders
[11] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — EVA, balance sheet & cashflow ratios
[12] MISC – O-PF (Masked by provisions) — CLSA (23 Feb 2025) — Quarterly segmental P&L summary

## 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] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [6] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [7] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [8] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [9] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [10] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [11] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>
- [12] **607951336LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951336LinqAlpha.PDF>

