MISC: Weaker Earnings Ahead

Results Update

For QE31/3/2016, MISC's net profit dropped by 24% q-o-q but rose 17% y-o-y to RM571 million while revenue dropped by 28% q-o-q or 4% y-o-y to RM2.39 billion. Revenue dropped q-o-q mainly due to lower revenue in Heavy Engineering as most of its projects are nearing completion and recognition of construction revenue for a finance lease asset under construction in Offshore business in the preceding quarter. PBT also increased q-o-q mainly due to reversal of provision for a legal suit and higher compensation for early termination of LNG time charter contracts in the current quarter which had more than offf-set the impairment provisions for early termination of contracts for two MOPUs and additional liner exit provisions in the current quarter. NP dropped due to a jump in non-controlling interests of RM224 million (as compared to a small credit of RM331k in QE31/12/2015).


 Table: MISC's last 8 quarterly results


Chart 1: MISC's last 40 quarterly results

Valuation

MISC (RM8.34 last Friday) is now trading at a PE of 14.6.times (based on last 4 quarterly EPS of 57 sen). At this PE, MISC is deemed fully valued.

Note: As at 11.00am, MISC was trading at RM7.63 ( a drop of 71 sen from last Friday close of RM8.34)

Technical Outlook

MISC struggled to hang onto its uptrend line, SS at RM9.00 in February & March. It failed to do so and in April, it pulled away from the uptrend line. This effectively signaled the reversal of its past 3 years of uptrend.


Chart 2: MISC's monthly chart as at May 9, 2016_10.30am (Source: ShareInvestor.com)


Chart 3: MISC's monthly chart as at May 9, 2016_10.30am (Source: ShareInvestor.com)

Conclusion

Based on weaker financial performance & bearish technical outlook, MISC's rating is revised from a HOLD to a SELL.

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.