Bloomberg News

MISC Drops After Forecasting Loss on Container-Shipping Exit

November 27, 2011

(Updates with closing shares prices in second paragraph.)

Nov. 25 (Bloomberg) -- MISC Bhd., Southeast Asia’s largest shipping line by market value, declined in Kuala Lumpur trading after forecasting a $400 million charge and a full-year loss from the closure of its unprofitable container-carrying unit.

The company, which also operates liquefied-natural gas and chemical tankers, dropped 5.4 percent to close at 5.38 ringgit. That was the worst performance among the 30 stocks in the benchmark FTSE Bursa Malaysia KLCI Index, which fell 1.1 percent.

MISC, controlled by state oil and gas company Petroliam Nasional Bhd., said yesterday it will exit container shipping after the unit lost $789 million in three years. Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K. have also announced container- shipping capacity cuts this year as tumbling rates cause industry wide losses.

The Malaysian shipping line’s exit “may not be timely as this could be the trough of the container liner business cycle,” Sean Yap, a Kuala Lumpur-based analyst at UOB-Kay Hian Holdings Ltd., wrote in a report today. Still, it will “ease the cash bleed from MISC and will also buy MISC some time to keep the tanker business afloat.”

Yap cut his share price estimate to 6.18 ringgit from 7.75 ringgit and maintained his “hold” rating.

MISC had 30 container ships in its fleet of 173 vessels as of Nov. 1, according to its website. The company also had 29 LNG ships, 83 petroleum tankers and 28 chemical tankers.

Intra-Asia Focus

The shipping line reorganized its container business in January 2010 by exiting Asia-Europe routes to focus on intra- Asia services. It plans to halt operating cargo-box ships by the end of June.

MISC also reported a 62 percent decline in second-quarter net income to 140.9 million ringgit ($44 million) as losses from carrying containers offset profits at units operating liquefied natural gas tankers and building offshore facilities.

The company’s sales dropped to 2.6 billion ringgit in the three months ended Sept. 30 from 3.1 billion ringgit a year earlier, it said. Its container unit had a 313 million ringgit operating loss compared with a 454.5 million ringgit operating profit in energy-shipping over the past two quarters.

--Editors: Neil Denslow, Suresh Seshadri

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

To contact the editor responsible for this story: Neil Denslow in Hong Kong at ndenslow@bloomberg.net


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