MISC- normality returned?

Result Update

For QE31/3/2013, MISC's net profit increased by 3% q-o-q or 8% y-o-y to RM2.38 billion while net profit dropped 58% q-o-q to RM300 million (or from a net loss of RM470 million in QE31/3/2012). The q-o-q decline in the bottom-line was attributable to exceptional gains recorded in the preceding quarter, such as the recognition of a one-off gain from the lease commencement of two Floating Storage Units (FSUs) & realization of 50% intercompany profit on disposal of Gumusut-Kakap Semi Floating-Production System (L) Ltd.

Revenue increased y-o-y due to more projects completed by the Heavy Engineering division, comboned with the commencement of the lease of the 2 FSUs in August 2012. In addition, the freight rates in the Chemical business had improved. These have more than offset the decline in revenue from the Petroleum business due to smaller number of operating vessels. Pre-tax profit increased y-o-y from RM139 million to RM355 million due to higher operating profit - a result of  lower operating cost brought on by a smaller fleet of vessels- and decline in net unrealized forex losses from RM111 million to RM14 million & impairment of ships from RM116 million to RM22 million.


Table: MISC's last 8 quarterly results


Chart 1: MISC's last 27 quarterly results

Valuation

MISC (closed at RM4.39 last Thursday) is now trading at a PE of 13 times (based on last 4 quarters' EPS of 34 sen). At this PE multiple, MISC is deemed fully valued.

Technical Outlook

MISC has yet to break above its 2 years old downward channel, with resistance at RM5.40. However, the share price may have found a floor at RM410-4.20. This could be the result of buying support brought on by the conditional GO at RM5.50 by Petronas which lapsed in April (here). We will see whether this support can hold in the absence of the Petronas's GO.


Chart 2: MISC's weekly chart as at Mar 23, 2013 (Source: Quickcharts)

Conclusion

Based on improved financial performance, MISC could be a stock to watch for a recovery play. The catalyst for an upgrade would be improved freight rates or a price breakout (at RM5.40 mark). For now, this stock is rated as a HOLD.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, MISC.