MISC riding the tide

MISC Bhd is positioning itself to be a beneficiary of the multi-year upcycle in the global energy shipping industry.

Analysts believe the group is anchoring its growth strategy on long-term charter contracts with energy producers, supported by an aggressive fleet modernisation programme.

Operationally, it’s in a sweet spot.

Controlling shareholder Petroliam Nasional Bhd’s (PETRONAS) integrated business model and international presence provide MISC with a steady pipeline of long-term contracts and recurring revenue streams, while excess tonnage is deployed in the spot charter market.

The latest award from the national oil company is a long-term time charter for a new 18,700 cu m liquefied natural gas (LNG) carrier from 2028. The vessel will support PETRONAS’ continued LNG supply to Sendai City, Japan.

AmInvestment Bank (AmInvest) Research estimates charter rates at below US$60,000 a day.

Global capital expenditure (capex) in energy infrastructure has also accelerated, driven by energy security concerns following the Iran war.

MISC’s response has been to double its total capex allocation to some US$3bil to US$4bil through 2030.

Much of this will fund firm orders for five 174,000 cu m LNG carriers for PETRONAS LNG due in 2029 to 2030, one 18,700 cu m small-scale LNG carrier due in 2028, and a floating storage regasification unit (FSRU) due in 2029.

Analysts are sanguine about MISC’s prospects as the energy shipping industry’s fundamentals are bullish.

“We are of the view that the tanker business is in a structural multi-year bull run, driven by vessel order books that remain near historic lows and a rapidly ageing global fleet. Tight shipyard capacity, constrained by the fact that they are largely booked out through 2028, will prevent a rapid expansion in industry supply and bolster profitability,” Kenneth Loh, Asia shipping and logistics analyst at Bloomberg Intelligence, tells StarBiz 7.

The biggest fortunes in shipping are often created by investing before the cycle fully turns. That point may have arrived, driven by the artificial intelligence (AI) boom, which is fuelling demand for power and energy infrastructure, and further boosted by the Iran war.

As a result, major renowned shipowners that had stayed on the sidelines for years are returning aggressively to the sector, recognising the strong tailwinds underpinning the industry.

From Greek shipping magnates to JPMorgan, investors have placed orders with Chinese shipyards for new very large crude carriers (VLCCs) as energy security becomes an increasingly strategic priority for countries.

Global oil trade routes are becoming longer while expansion in liquefaction capacity requires new LNG tanker capacity to move cargo to demand destinations. As a result, charter rates remain well supported.

“We see tonne-mile demand growth remaining robust as global energy trade routes undergo a permanent rewiring, such as East Asia sourcing more crude from across the Pacific in order to reduce dependence on Middle East sources.

“Demand for, and freight rates for, LNG carriers should also see support from a steady pipeline of new LNG supply coming online with the ramp-up of liquefaction projects. That should also keep MISC’s LNG segment earnings firm over the medium term,” says Loh.

Amid all that, fleet renewal pressures have increased driven by age of tonnage, commercial considerations and tighter environmental regulations.

Industry reports estimate that global LNG carrier orders will reach 550 additional vessels between 2026 and 2035. More than 250 VLCCs have already been ordered, reflecting expectations of sustained long-haul crude transportation demand and tight vessel availability despite the ongoing energy transition.

The VLCC market has also seen an interesting development. South Korea’s Sinokor Merchant Marine and Mediterranean Shipping Co are reportedly attempting to corner 18% to 20% of spot VLCC capacity in a bid to influence charter rates.

The 120 to 130 vessels controlled by Sinokor account for 16% to 17% of the global compliant fleet of about 750 vessels, or an estimated 18% to 20% of spot market capacity.

The global VLCC fleet stands at roughly 920 vessels with around 170 of these forming part of the so-called “shadow fleet”. Any attempt by Sinokor to tighten tonnage availability at a time when voyages are lengthening should, at the very least, provide support for charter rates.

MISC has 13 VLCCs among its 73 petroleum and product tankers, as well as 32 LNG carriers. About two-thirds of its revenue in financial year 2025 (FY25) was generated by its LNG and petroleum tanker businesses.

With second-quarter FY26 (2Q26) earnings due this month, analysts expect MISC to report a robust quarter, supported by elevated energy freight rates and maximised operational days as the Middle East conflict drags on.

“Higher profitability, matching our baseline expectations, should sustain through 2Q26 given the robust outlook for both LNG-carrier and crude-tanker charter rates.

“The Iran war will likely continue to drive shifts in global oil trade flows toward longer voyages, which we believe will keep tonne-mile demand robust. The key downside risk remains revenue weakness due to lower contributions from projects reaching completion in the coming quarters,” Loh says.

Spot tanker charter rates have risen 24% since early July and are expected to remain elevated through the 3Q26, which should help MISC post a strong FY26 performance.

Its profitability, however, might disappoint some, with about 70% of its fleet operating under long-term charters. This would have capped the earnings upside from the surge in spot rates during 2Q26.

“At the same time, given that charter rates are set to remain elevated, we are of the view that the company can still secure strong earnings for 3Q26 and 4Q26 as contracts are renegotiated at higher rates,” says Loh.

The Iran conflict is also expected to remain a key driver of charter rates. Shipping diversions will continue to shape the industry’s outlook.

As vessels continue to avoid the Strait of Hormuz and face growing security risks in the Red Sea, more are likely to reroute via the Cape of Good Hope.

Both factors should push tonne-mile demand higher, absorbing effective market capacity and supporting elevated charter rates over the medium term, Loh says.

Reflecting the favourable outlook, AmInvest Research has a “buy” call on MISC with a target price of RM9.50 and forecasts a higher FY26 dividend of 41.6 sen per share, equivalent to a yield of about 5%.