MISC Berhad (MISC) is set to enhance its deepwater FPSO (Floating Production Storage and Offloading) assets through a strategic swap deal with SBM Holdings Inc. S.A. The transaction, expected to be finalised by January 2025, involves MISC acquiring a 49% stake in FPSO Kikeh while divesting its 49% stake in FPSO Espirito Santo. This move aligns with MISC's strategy to streamline its assets and focus on its core operations in Malaysia.
The deal includes the transfer of equity interests between MISC's subsidiaries and SBM, with no cash exchanged. The acquisition of the remaining 49% stake in FPSO Kikeh, the largest deepwater FPSO in Malaysia with a production capacity of 120,000 barrels of oil equivalent per day, reflects MISC's commitment to maintaining control over key assets in the region. Meanwhile, the divestment of the FPSO Espirito Santo, operating in Brazil, will reduce MISC's exposure to ageing assets and potentially decrease operational complexities.
Analysts at Kenanga Stock Broking House have maintained a MARKET PERFORM rating on MISC with a target price of RM8.09. They project a modest increase in earnings of RM37.2 million from the asset swap, though they note that the overall impact on the company's sum-of-the-parts valuation will be minimal. Despite the swap, MISC's financial projections remain largely unchanged, with a slight adjustment to FY25 earnings forecasts.
MIDF Stock Broking House have reiterated a BUY call on MISC with an unchanged target price of RM9.75. They view the acquisition of FPSO Kikeh, which has been awarded a six-year contract extension by PTTEP Sabah Oil, as a strategic advantage, despite the vessel nearing its 50-year service mark. The acquisition is seen as a move to enhance MISC's operational control and efficiency in maintenance and logistics within the Malaysian market. The acquisition also aligns with MISC's broader strategy to streamline its asset portfolio and focus on assets closer to home.
The strategic acquisition and divestment are expected to provide MISC with greater operational control over FPSO Kikeh and enhance its capabilities in the deepwater Sabah region, where further exploration and production potential exists. This move is anticipated to improve time and cost efficiency in maintenance and ensure regulatory compliance, positioning MISC for long-term success in the evolving energy market.
