RHB Research has downgraded MISC Bhd to "neutral" from "buy" with a fair value of RM6.09 as it expects earnings shortfall from the shipping company's heavy engineering segment to offset the positive surprise.
RHB yesterday said MISC's results for the fourth quarter are likely to spring a pleasant surprise due to lower than anticipated losses from its petroleum tanker division, which saw rates increasing between 45 and 352 per cent quarter-on-quarter and 82 and 108 per cent year-on-year.
"Thanks to strong Asian imports for stockbuilding and refineries ahead of higher winter demand, fourth quarter 2013's overall petroleum tanker rates soared between 45 and 352 per cent quarter-on-quarter and 82 and 108 per cent year-on-year.
"MISC's petroleum tanker fleet mostly comprises Aframax vessels, whose rates have risen by as much as 45 per cent quarter-on-quarter and 102 per cent year-on-year to an average US$20,400 (RM67,320) per day, slightly above the break even level of US$20,000/day.
"This will bring some relief to MISC as its petroleum tanker losses are expected to shrink in the fourth quarter onwards," it explained.
RHB Research added that the strong rally in tanker rates was shortlived as overall rates this week plunged between 35 and 50 per cent week-on-week to the November 2013 levels, at the mid-point of the rally that started in October.