MISC to become formidable global oil & gas carrier
<a href=www.theedgedaily.com>theedgedaily.com 30-04-2003: By Jimmy Yeow, 4.25pm
Malaysia International Shipping Corporation Bhd's acquisition of American Eagle Tankers Ltd (AET) fits into its plans to become a global oil and gas carrier by providing the last big piece of the jigsaw puzzle - the Atlantic basin oil market.
"AET is a well-known player in the Atlantic basin and it fits in with the big picture of MISC's vision," says International Shipowners Association of Malaysia chairman Datuk Abdul Latif Abdullah.
"Although MISC is a big player itself, its market has been traditionally confined to the Europe-Middle East-Far East routes and AET will enable it to spread its wings to another important oil market," he tells theedgedaily.com.
He adds the earnings potential from AET will depend very much on the freight rates, which is dependent on the oil and gas industry demand and whether AET manages to secure long-term charter contracts for its tankers.
Abdul Latif believes that MISC's purchase of AET is part of its long-term earnings plan and it will be positive to the national carrier.
Meanwhile, analysts described the purchase as a good deal for MISC, which allows the company to spread its earnings base from the Liquefied Natural Gas (LNG) transportation services.
MISC will pay US$445 million or RM1.69 billion cash to Neptune Orient Lines Ltd for AET.
"At 45 per cent premium to AET's net asset of US$307.6 million, it seems fair in view of the long-term earnings potential," AmResearch says in its daily report.
It points out that financing for the acquisition through borrowings should not be a problem for MISC as its gearing ratio would increase from 0.7 times to one time including AET's US$343 million borrowings.
AmResearch said AET had in March this year secured a seven plus three years contract to transport fuel from Venezuela to Asia for a contract value of about US$220 million.
The research house has maintained its buy recommendation for MISC.
Mayban Securities Research says the deal was not a surprise as MISC had earlier this year indicated its intention to invest in AET.
"We believe that MISC's interest in AET is part of the group's goal to be a premier player in the global energy transportation market," it says.
Meanwhile, MISC managing director Datuk Mohd Ali Yasin was quoted to have told a news conference on April 30 that MISC expects a minimum 10 per cent return in profit from its acquisition of AET.
He said there was no immediate plan to sell bonds but would look out for a short-term bridging loan to finance the purchase.