---
endpoint: analytics
pattern: Transport
status: done
latency_ms: 202008
conversation_id: d1dc50df-b4f3-4aa1-b6f3-785a3495ad0f
citations: 3
created: 2026-05-31 18:49:18Z
---

# What is MISC’s core business franchise and the key components of its operating model?

# MISC Berhad — Core Business Franchise & Operating Model

## 1. Corporate Identity & Ownership

MISC Berhad (Reuters: MISC.KL; Bloomberg: MISC MK) is a Malaysia-listed energy shipping and offshore services group classified by CLSA under "Malaysia — Transport." It is majority-controlled by **Petroliam Nasional Bhd (Petronas), which holds 51.0%**, with the **Employees Provident Fund (EPF) the second-largest shareholder at 12.9%**; free float is estimated at ~15.8% and market cap was ~US$7.2bn as of Feb 2025 [1]. The Petronas relationship is the cornerstone of the franchise — MISC is effectively the captive (and now publicly-listed) shipping/offshore vehicle for the Malaysian national oil company, which makes much of its asset base tied to long-dated Petronas project flows (LNG carriers serving Petronas LNG plants, FPSOs deployed on Petronas-operated fields, etc.).

## 2. Four-Segment Operating Model

MISC reports as **four operating segments**: **Gas (LNG) Shipping, Petroleum Shipping, Offshore (FPSO/FSO), and Marine & Heavy Engineering**. The four-segment structure is consistently disclosed in the 2024 results breakdown [2], in the operating-profit mix [3], in the SOTP build [4], and is the same structure that frames the FY2026 reporting under refreshed segment labels (GAS / OFFSHORE / PETROLEUM / HEAVY ENGINEERING) [10].

### 2024 mix — Revenue vs. operating profit (RMm)

| Segment | FY24 Revenue | % of Revenue | FY24 Op Profit | % of Op Profit |
|---|---|---|---|---|
| LNG (Gas) Shipping | 2,987.4 | 22.6% | 1,047.7 | 38% [3] |
| Petroleum Shipping | 5,044.1 | 38.1% | 1,482.7 | 49% [3] |
| Offshore | 1,636.3 | 12.4% | 51.5 | 8% [3] |
| Heavy Engineering | 3,608.6 | 27.3% | 141.0 | 5% [3] |
| **Group** | **13,237.5** | **100%** | **2,593.7** | **100%** |

Source: derived from CLSA's FY24 segment table [2]; profit-mix shares per CLSA's pie [3].

The takeaway from this mix is the core operating-model dynamic: **Petroleum and LNG together generated ~87% of FY24 operating profit on ~61% of revenue**, while **Heavy Engineering generated ~27% of revenue but only ~5% of profit** [2][3]. The four segments are mechanically different businesses with very different margin profiles — i.e. the franchise is best understood as a "barbell" of high-margin chartering income plus a low-margin engineering/yard operation.

### 2.1 Gas / LNG Shipping
Long-term-contracted LNG carrier business — a fleet of LNG vessels chartered to gas off-takers (predominantly Petronas LNG plants in Bintulu, plus international LNG projects MISC has won) under multi-year time-charter contracts. CLSA's investment thesis describes the franchise driver as "**stable earnings from long-term charter contracts and lack of carriers available in the market**" [5] — i.e. revenue visibility comes from contracted earning days at fixed daily rates rather than spot exposure. In FY24, the Gas segment generated USD2,987m revenue and RM1,048m operating profit (a ~35% operating margin) [2]. Headline 2024 results were "**masked by provisions**" because of **bleak gas vessel charter rates amid an influx of vessel supply** that triggered impairment charges; CLSA expected charter rates for gas vessels to remain stagnant into 2025 given higher LNG carrier deliveries (86 vs. 65 in 2023) and ample gas inventory [6].

### 2.2 Petroleum Shipping
A fleet of crude tankers, product tankers and **shuttle tankers** (the shuttle-tanker franchise is large enough that CLSA values it as a separate SOTP line). The petroleum book mixes vessels on time-charters with vessels exposed to spot tanker rates. In FY24 this was the **largest single profit contributor at ~49% of group operating profit** on RM5,044m of revenue (~29% operating margin) [2][3]. CLSA's outlook for 2025 highlighted "**average tanker rates continuing to be positive supported by high tonne-mile demand from continuous vessel rerouting coupled with minimal fleet expansion**" [6] — i.e. the petroleum franchise is the cyclical earnings engine for the group, currently benefiting from re-routed crude flows out of the US, Brazil and Guyana. Q1 FY2026 disclosures confirmed Petroleum remained the dominant earnings driver: USD382m revenue, USD109m operating profit and USD129m PAT vs. USD281m / USD83m / USD67m a year earlier [10].

### 2.3 Offshore
The FPSO/FSO (Floating Production Storage & Offloading / Floating Storage & Offloading) business — long-life production assets leased to oil & gas operators under decade-plus contracts. The franchise's near-term capital project is the **Mero 3 FPSO** for Petrobras (50%-owned), whose first-oil contribution started flowing in 2024/25 [5]. The segment slumped in FY24 (RM52m operating profit vs. RM652m in FY23, an ~92% drop) because of impairments after Mero 3's delivery [2]. Catalysts for the segment are FPSO contract wins to replenish the orderbook [5]; as of early 2025, CLSA noted ~10 FPSO awards were expected industry-wide in 2025 (and 11 in 2026), but MISC was prioritising **due diligence on a proposed merger with Bumi Armada** before submitting new FPSO tenders [6].

### 2.4 Marine & Heavy Engineering (MMHE)
Operated through MISC's **66.5%-owned listed subsidiary Malaysia Marine and Heavy Engineering (MMHE)**, which runs yards that fabricate and convert offshore platforms, FPSO topsides, marine repair, etc. [7]. This is the volume / low-margin segment — FY24 revenue of RM3,609m delivered just RM141m operating profit (~4% margin) and only ~5% of group profit [2][3]. The unit's earnings are project-completion-driven and lumpy: Q1 FY25 revenue declined 18% YoY/16% QoQ as "several ongoing key projects are nearing completion, which led to reduced activity… while new projects are still in the early stages of execution and have yet to contribute meaningfully to the top line" [9]. Per CLSA's SOTP, MMHE is carried at just RM0.18/share — i.e. economically the engineering arm is a strategic adjunct to the offshore franchise rather than a profit driver [4].

## 3. How the Operating Model Generates Earnings

Stitching the four legs together, MISC's operating model is best described as a **two-track contracted-cash-flow + cyclical-shipping platform**:

- **Contracted-revenue track (Gas + Offshore + shuttle tankers in Petroleum)**: long-term time-charters / lease contracts (typically 10–25 years) where MISC owns/operates assets and receives fixed daily charter income. CLSA values these lines on **DCF of free cash flow at a 7.9% WACC** (for recent contract wins, Mero 3, and shuttle tankers) and **~10.1x EV/EBITDA** for existing LNG and offshore fleets [4]. Stability comes from "**long-term charter contracts and lack of carriers available in the market**" [5].
- **Cyclical track (spot/short-charter Petroleum + Heavy Engineering)**: exposed to spot tanker rates, vessel utilization, and project-completion timing — the segments that drive period-over-period earnings volatility and (in 2024) the impairment/provision risk that "masked" underlying earnings [6][9].

The model also embeds **two minority listed-asset stakes** that CLSA values separately in its sum-of-the-parts:
- **66.5% stake in MMHE** (the Heavy Engineering arm) — valued at consensus RM0.77/share for MMHE, contributing RM0.18 to MISC's per-share SOTP [4][7]
- **2.3% stake in Bintulu Port** — valued at current market cap, ~RM0.01/share [4][7]

## 4. Group P&L Shape (FY24A → FY25CL)

The composite financial profile reflects the mix above — large fixed-asset base, heavy depreciation, EBITDA-led earnings:

| RMm | FY23A | FY24A | FY25CL |
|---|---|---|---|
| Revenue | 14,272 | 13,238 | 13,031 [2] |
| Operating EBITDA | 6,063 | 5,545 | 6,207 [2] |
| Operating EBIT | 2,881 | 2,594 | 3,301 [2] |
| Net profit | 2,124 | 1,194 | 2,856 [2] |
| EBITDA margin | 42.5% | 41.9% | 47.6% [2] |
| Net debt / equity | 24.6% | 30.2% | 27.4% [2] |
| ROE | 5.5% | 3.1% | 7.3% [2] |

Capex runs around **15% of sales** (~RM2bn/year), reflecting the asset-heavy nature of the franchise (vessels and offshore floaters), and net debt/EBITDA ran at 2.2x in FY24 — i.e. moderate leverage funding a long-life asset base [2].

## 5. Sum-of-the-Parts Anatomy (CLSA, Feb 2025)

A clean way to "see" the operating model is CLSA's SOTP breakdown of the equity value (RM8.25/share target), which decomposes the franchise into its income-stream constituents [4]:

| Component | Value (RMm) | Per share (RM) | Valuation basis |
|---|---|---|---|
| LNG Shipping — existing fleet | 18,640 | 4.18 | 10.1x EV/EBITDA |
| LNG Shipping — recent contract wins | 5,486 | 1.23 | DCF at 7.9% WACC |
| Petroleum Shipping — existing fleet | 8,535 | 1.91 | Market value of vessels owned |
| Petroleum Shipping — shuttle tankers | 5,965 | 1.34 | DCF at 7.9% WACC |
| Offshore — existing fleet | 5,252 | 1.18 | 10.1x EV/EBITDA |
| Offshore — Mero 3 (50% stake) | 3,953 | 0.89 | DCF at 7.9% WACC |
| Heavy Engineering (66.5% MMHE) | 819 | 0.18 | Consensus RM0.77/MMHE share |
| Bintulu Port stake (2.3%) | 44 | 0.01 | Market cap |
| Gross SOTP | 48,694 | 10.91 | |
| Less: net debt + minorities | (12,045) | (2.70) | |
| **SOTP equity value** | **36,649** | **8.25** | |

The SOTP makes clear that **LNG Shipping (~RM5.40/share) plus Petroleum Shipping (~RM3.25/share) make up ~80% of gross equity value, with Offshore (~RM2.06/share) the third leg and Heavy Engineering essentially a stub** [4]. Operationally, the group's value is in the contracted shipping fleets, with offshore as the growth engine and MMHE as a strategic capability rather than a profit center.

## 6. Forward-Looking Strategic Initiative — Bumi Armada Merger

In addition to the four operating segments, a key element of the current operating model is MISC's pending **due-diligence-stage merger talks with Bumi Armada Bhd (BAB MK)**, another Malaysia-listed offshore (FPSO) operator. CLSA flagged that MISC would prioritise the merger plan before submitting new FPSO tenders, with no new tenders expected until due diligence concludes [6]. A consummated deal would consolidate Malaysia's domestic FPSO franchise inside MISC.

---

**Sources**
[1] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF — Priced-on table showing Petronas 51.0% / EPF 12.9% ownership.
[2] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF — Summary of 2024 results: segmental revenue & operating profit breakdown.
[3] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF — FY24 segmental profit mix (Petroleum 49%, LNG 38%, Offshore 8%, HE 5%).
[4] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF — SOTP-derived target price table.
[5] CLSA — MISC HLD (Within estimates), 25 Aug 2024 — 607937237LinqAlpha.PDF — Investment thesis paragraph on long-term charter contracts.
[6] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF — Outlook on gas vs. petroleum charter rates, FPSO market, Bumi Armada merger.
[7] CLSA — MISC O-PF (Masked by provisions), 23 Feb 2025 — 607951336LinqAlpha.PDF — Valuation methodology: MMHE 66.5% stake, Bintulu Port 2.3% stake.
[8] CLSA — MISC HLD (Within estimates), 25 Aug 2024 — 607937237LinqAlpha.PDF — 1H24 segmental revenue/operating profit table.
[9] MISC Berhad — Q1 2025 Earnings Call Transcript — Marine & Heavy Engineering and Gas segment commentary; FPSO lease contract gain.
[10] MISC Berhad — Q1 2026 Earnings Call Slides — Q1 2026 segmental financial performance table (Gas/Offshore/Petroleum/Heavy Engineering).

## Citations

- [9] **Q1 2025 MISC Berhad** · external
- [10] **MISC Bhd. Slide 1: Q1 2026 Earnings Call** · external
- [11] **Q1 2025 MISC Berhad** · external

