MISC Bhd (3816), the world's largest carrier of liquefied natural gas, said the downcycle in the shipping industry is here to stay for the next two to three years.
Its president and chief executive officer Amir Hamzah told analysts during a recent briefing that the group has taken steps to safeguard assets as part of its response to the global financial crisis, Citi Investment Research said.
"(These include) moving towards more term business, and where opportunities are, to withdraw capacity in the liner business," Citi wrote in a report dated March 4 2009.
"MISC will take delivery of contracted new buildings, which it will gradually replace with chartered-in capacity. It is more a replacement strategy now than the addition of capacity," it added.
MISC's integrated liner segment loss ballooned to RM229.5 million in the third quarter ended December 31 this year, from RM156.2 million in the second quarter. That was the fourth consecutive quarter of losses, which continue to widen.
Citi said unlike last year when MISC had to deal only with declining liner rates, this year the group is facing a double whammy of declining container volume and softening freight rates.
As a result, the research com-pany expects MISC's fourth-quarter loss to come in higher at RM361 million.
For the nine months ended December 31 2009, the LNG and petroleum segments accounted for 64.8 per cent and 57.8 per cent of the group's pretax profit, respectively. Integrated liner logistics, chemical and non-shipping business reported losses.
Citi is also slashing its net profit forecast for fiscal 2009 to 2011 by 12-24 per cent, mainly to factor in higher losses for the liner segment.
"The liner business will continue to be a drag on overall group earnings," it said, maintaining a "sell" rating on MISC, with a new price target of RM7.80, down from RM8.53.
Source: NST Online