KUALA LUMPUR: After a year-on-year (y-o-y) drop in core earnings over the first half of the year, MISC Bhd could continue to see negative pressure on its earnings as the short-term outlook for petroleum tanker spot rates remains challenging.

       According to Kenanga Research, the petroleum tanker spot rates could be the biggest external risk to MISC's quarter-to-quarter earnings fluctuations as 28% of its petroleum shipping fleet is exposed to the spot market.

       However, the research house remains bullish on the group's stable and attractive dividend yields of about 5%, coupled with its ESG-compliant angle, inclusion in the F4GBM index as well as its four-star ESG rating by FTSE Russell.

       "Maintain OUTPERFORM, with unchanged TP of RM8.10, pegged to 1.1x PBV. Post-results, we make no changes to our FY21-22E numbers," said Kenanga.

       In 1HFY21, MISC's core net profit of RM1.03bil was deemed within expectations at 48% and 55% of Kenanga's and consensus full-year estimates.

       The earnings were 27% lower y-o-y due to a plunge in spot charter rates dragging on petroleum shipping, weaker LNG shipping from higher vessel opex and widened losses in heavy engineering, partially offser by a better offshore segment from construction gains in Mero-3 FPSO.

       MISC's interim dividend of seven sen per share brought year-to-date dividends to 14 sen per share, which was also within expectations.