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is
Petroliam
Nasional
Berhad
(PETRONAS),
the
national
oil
1.0 STRENGTHS
MISC has a strong market position and is one of the largest shipping conglomerates in the
world in terms of market capitalization. With 27 LNG carriers, it is currently one of the largest
single owner/operator of LNG fleet in the world. Through its wholly owned subsidiary AET,
MISC is one of the leading global tanker operators and the third largest owner-operator of
Aframax tankers in theworld. The group also holds the leading market share of the US Gulf
ship-to-ship transfer businessthrough its lightering operations. In addition, the group has
wide presence and considerable marketposition in various industries, including chemical
shipping, petroleum shipping, container shipping,offshore business, marine and heavy
engineering business, integrated logistics business, tank terminal business and fleet
management business. Hence, a strong market position in diversified business segments
enhances the brand image of the group, while increasing its revenue base.
MISC recorded growth in both sales and profits in FY2012.The group recorded revenues of
MYR9,484 million ($3,082.5 million) during FY2012, an increase of 31.2% over FY2011.
Similarly, the operating profit grew by 6.4% to MYR1,717.1 million ($558.1 million) in
FY2012. The net profit of MISC more than doubled to MYR1,394.5 million ($453.2 million) in
FY2012 , compared to MYR590 million($191.7 million) in FY2011. The groups net margins
also grew strongly in FY2012. The groups netprofit margin improved to 14.7% in FY2012
from 8.2% in FY2011. Furthermore, the group witnessed strong growth across all geographic
regions in FY2012. During the year, Malaysia (representing 60.5% of the total revenues)
grew by 38.2%), while revenues from the Americas, Asia and Africa, Europe, and Australasia
grew by 22%, 11.3%,39%, and 43.9%, respectively. Thus, strong financial performance
across all geographies enhances its shareholder's value and allows the group to fuel its
expansion plans.
2.0 WEAKNESSES
MISC is highly indebted. At the end of FY2012, the group had total long term borrowings of
MYR6,507.1 million ($2,114.9 million). In addition to this, the group's total debts stood at
MYR 9,371.9 million ($3,046.1 million) in FY2012. This heavy debt could force MISC to
allocate a considerable portion of cash flows from operations to debt service payments and
also limits its ability to obtain additional financing. The groups interest expenses stood at
MYR491.2 million ($159.6 million) and MYR351.6 million ($114.3 million) in FY2012 and
FY2011, respectively. The groups high level of debt obligations could impact its ability to
obtain additional financing to support its expansion plans. In addition, it could also lead to the
diversion of its cash flows from operations and expansion plans to service the fixed
obligations. This in turn places MISC at a possible competitive disadvantage compared to
competitors that have better access to capital resources.
Although MISC has expanded to other international regions, it still depends on the Malaysia
market for majority of its revenue. In FY2012, the group generated about 60.5% of its
revenue from Malaysia. This over-dependence on the Malaysian market may have a
dampening influence on the group's revenues if the economy and/or the group's sales in
Malaysia do not grow as expected. High dependence on the domestic market may restrict
MISC's income growth to the local economy. It makes the group susceptible to changes
associated with the economic and political situation of the country. Thus, the group's high
reliance on one market exposes it to the risk of downturns in the country's macroeconomic
conditions and amplifies its business risk.
3.0 OPPORTUNITIES
The global marine freight industry has been growing since 2010 after a period of decline in
the previous two years. Further, the future forecasts indicate consistently solid rates of
growth up-until and including 2015. According to MarketLine (a unit of Informa plc), the
global marine freight industry generated total revenue of $427.1 billion in 2012, representing
a compound annual growth rate (CAGR) of 6.5% between 2010 and 2012.
operates a fleet of crude and product tankers from the London, Singapore, Houston and
Gurgaon in India. It also has on order four very large crude carriers (VLCCs), four Suezmax
tankers and two DP shuttle tankers. Moreover, MISC through its joint venture with Vitol
operates tank terminals globally with a total of approximately 7.8 million coalbed methane
(cbm) of tank storage capacity across 12 terminals in 11 countries. Thus, MISC is well
positioned to capitalize on the growing global oil and gas transportation industry.
4.0 THREATS
The shipping industry across the globe is highly competitive in nature.This market consists of
several multinational companies including A.P. Moller-Maersk, Hanjin Shipping, Kawasaki
Kisen Kaisha, Malaysian Merchant Marine, Mitsui O.S.K. Lines, Neptune Orient Lines,
Nippon Yusen Kabushiki Kaisha, and Overseas Shipholding Group. Each of these
companies offers a comprehensive range of services through a global platform. As a result,
pricing pressures on freight rates are intense and maintaining low delivery time is a crucial
determinant of the success or failure of firms operating in this field. Product differentiation is
low, and players seek to differentiate their services by offering faster delivery times and
extended services to attract market share. Moving forward, the market also faces significant
cost pressures, including freight rates and rising fuel costs. Moreover, large players are also
investing in higher capacity vessels to carry high volumes and to optimize delivery times, a
key metric of efficiency. Intense competition may thus put additional pressures on the
groups operations and could adversely impact MISCs performance.
The market price of bunker is generally linked to the price of crude oil, and any increase in
bunker prices has a negative impact on earnings for MISC. According to industry estimates,
during 2012, the bunker price reached $672 per metric ton and is expected to grow higher in
the coming years. It is estimated that in 2013, the average bunker prices would grow by
2.7% to reach $690 per ton. Moreover, it is estimated that the bunker costs would average
$760 per ton by 2017. Bunker oil prices account for a substantial portion of the costs MISC
incurs in the liner trade, bulk shipping, and air cargo businesses. The group may not be able
to pass on all the costs of bunker fuel price increases to customers through rate hikes or fuel
surcharges. Consequently, a rise in fuel costs could distress the group's business, financial
condition, and operating performance.
Amidst the global war on terror, international attention has largely been focused on terrestrial
operations, but the sea remains a fertile ground for attack. According to the International
Chamber of Commerce (ICC) International Maritime Bureau (IMB) global piracy report, in the
first three months of 2013, four vessels were hijacked, 51 vessels were boarded, seven were
fired upon and four reported attempted attacks. In the Gulf of Guinea 15 incidents were
reported, including three hijackings. Nigeria accounted for 11 incidents in the region. Also, an
offshore supply vessel with 15 crew members was also hijacked. A further 14 crew were
kidnapped from four different vessels in Nigeria. On the eastern side of Africa, Somalia
recorded five incidents, including the hijacking of a fishing vessel and its 20 member crew. In
the Indian Ocean, two vessels were fired upon. There were also two attempted attacks
against A framax sized tankers in the Gulf of Aden. The shipping companies are faced with
the risk of paying a ransom in return for its ships. Such attacks could impact the operating
structure of the group, thus negatively affecting the overall business of the group.
http://www.misc.com.my/2011-@MISC_Announces_Its_Exit_From_The_Liner_Business.aspx