MISC may need cash call to strengthen balance sheet

A cash call to strengthen MISC Bhd’s balance sheet in the medium term might be in place, said UOB KayHian Research.
In a client note, the research house said: “We believe MISC may need to exercise a cash call to strengthen its balance sheet in the medium term, which could dampen share price.”
According to the report, MISC’s net cash outflow for the financial year ending Dec 31, 2013 has been forecast at RM533mil compared with RM22mil a year ago. It expects the shipping giant’s earnings per share growth to come in at –24.4% and net debt to equity to be at 21.9%.
Excluding a one-off impairment, the research outfit said that there could be a potential shortfall in 2013 earnings compared with consensus estimates, as the shipping firm had made a reversal on net impairment for RM47.9mil.
The shipping company’s sluggish business outlook and lack of catalysts had prompted the research outfit to downgrade the counter to a “sell”, with a lower target price of RM4.68 from RM5.30 previously.
Separately, CIMB Research said MISC would negotiate potential operation and maintenance contracts for liquefied natural gas (LNG) ships, as well as earn some income from technical consultancy services as a mitigating measure of the possible declining income source from its parent company under the LNG segment.
“It would also pursue third-party LNG shipping contracts, now that it no longer needs to set aside balance sheet capacity for Petronas’ new LNG vessels. But in our view, these third-party contracts may not meet MISC’s minimum internal rate of return hurdles,” CIMB Research added.
Source: The Star Online