Pending LNG Carriers Will Modernize Eco-Efficient Marine Fleet

Key Takeaways

• Expanding and modernizing the fleet, along with strategic partnerships, positions MISC for resilient earnings and diversified revenue as global energy demand evolves.
  
• Investments in eco-efficient vessels and offshore assets align with ESG trends and regulatory shifts, supporting margin stability and long-term growth.
  
• Persistent LNG shipping overcapacity, asset impairments, high capital outlays, margin pressure, and energy transition threats undermine MISC Berhad's long-term profitability and growth prospects.

Catalysts

Engages in ship ownership and operation, other activities related to shipping services, and the operation of offshore floating terminals in Malaysia, the United States, Asia, Africa, and Europe.

• The pending delivery of 6 additional new LNG carriers by year-end (and another 12 by 2027) is set to significantly expand MISC Berhad's modern fleet under long-term charters, ensuring greater revenue visibility and supporting resilient earnings growth from 2026 onwards as global LNG demand rebounds.
  
• Strategic partnerships and joint ventures (e.g., with QatarEnergy, Petronas, MOL, MMHE) enable MISC to capture new cargo flows across Asia and broaden participation in the energy transition (LNG, CCS, low-carbon power), which are likely to boost future recurring revenue and enhance margin stability.
  
• Strong upstream capex and a robust offshore pipeline (with global FPSO demand projected to remain elevated through 2028) position MISC's offshore segment for sustained growth and high cash flow, further reinforced by the company's active pursuit of new awards and monetization of existing assets-supportive for both long-term earnings and cash generation.
  
• Ongoing fleet modernization, with an emphasis on eco-efficient, dual-fuel and alternative fuel vessels, aligns MISC with emerging emissions standards and customer ESG requirements, helping maintain charter premiums and defend/increase net margins as regulatory pressures mount industry-wide.
  
• Asia's continued economic expansion, macro-driven trade flows, and a rising focus on resilient supply chains position MISC, as a trusted regional shipping operator, to benefit from sustained utilization rates and top-line growth, especially as new energy infrastructure drives incremental demand for sophisticated shipping solutions.

MISC Berhad Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming MISC Berhad's revenue will grow by 6.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.0% today to 22.2% in 3 years time.
• Analysts expect earnings to reach MYR 3.2 billion (and earnings per share of MYR 0.59) by about September 2028, up from MYR 1.1 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.6x on those 2028 earnings, down from 31.3x today. This future PE is greater than the current PE for the MY Shipping industry at 14.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.66%, as per the Simply Wall St company report.

MISC Berhad Future Earnings Per Share Growth

Risks

• Persistent overcapacity in LNG shipping: The LNG carrier fleet is expanding rapidly (expected 8% annual growth, 500+ new vessels by 2030), while several of MISC's older vessels are already laid up and additional contracts are expiring soon. This oversupply, especially for less efficient steam vessels, will likely depress charter rates, force more vessels into lay-up or scrap, and lead to more impairments, negatively impacting revenue and net margins.
  
• Large impairment charges and asset write-downs: MISC has recognized significant impairments on its LNG fleet (notably, $26 million in Q2 2025, covering 8 vessels), with the market value of these assets dropping by 20%. This trend may recur as more contracts expire and soft spot rates persist, continuing to weigh on net earnings and asset values.
  
• Heavy capital expenditure and fleet renewal needs: Ongoing investment in modern, dual-fuel and eco-efficient vessels is required to stay competitive, given regulatory and customer pressures. High capex and the need to maintain a conservative net debt/EBITDA ratio (to preserve credit ratings) could constrain free cash flow, reduce dividend capacity, or limit growth opportunities, pressuring future returns.
  
• Exposure to spot markets and declining margins: The proportion of tankers and gas carriers on spot contracts exposes MISC to volatile freight rates and rising operating costs, which have already caused margin compression-evident as higher revenues in the Petroleum segment were offset by lower term-to-spot ratio and increased owner-borne costs, eroding net profit margins.
  
• Long-term energy transition risks and client concentration: Despite near-term resilience, global LNG and fossil fuel demand are projected to peak by the late 2030s/2040s, and MISC remains dependent on several large clients and a traditional shipping-focused business model. This leaves its long-term revenue base vulnerable to a secular shift towards renewables, regulatory changes, and the risk of losing key contracts without sufficient diversification or integration into downstream value chains.

Valuation

• The analysts have a consensus price target of MYR8.367 for MISC Berhad based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MYR9.7, and the most bearish reporting a price target of just MYR7.35.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be MYR14.2 billion, earnings will come to MYR3.2 billion, and it would be trading on a PE ratio of 15.6x, assuming you use a discount rate of 9.7%.
  
• Given the current share price of MYR7.46, the analyst price target of MYR8.37 is 10.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.