MISC's AET to benefit from higher aframax spot freight rates

KUALA LUMPUR, March 14  -- AET, MISC Bhd's wholly-owned petroleum subsidiary, may benefit from the strong jump in aframax spot freight rates after the outbreak of the Russia-Ukraine war, as 40 per cent of its aframax fleet is trading on the spot market.

In a research note, CGS-CIMB Securities Sdn Bhd said if aframax freight rate strength spills over to the very large crude carriers (VLCC) and Suezmax vessel classes (also due to the potential return of Iranian barrels), and spreads more widely to aframax routes outside of the Russian ports, AET may benefit more. 

Aframax and Suezmax rates spiked as these are the vessel types used to export Russian crude oil via ports on the Baltic Sea (Primorsk and Ust-Luga), Black Sea (Novorossisyk), and the Russian Far East (Kozmino), all of which cannot accommodate VLCCs and can only export via aframaxes and suezmaxes.

"We forecast AET to deliver a pretax profit of US$140 million, a 15 per cent margin in the financial year (FY) 2022, which is much higher than the US$38 million reported for FY2021," it said.

The bear case scenario is if Russian crude oil supplies are completely ostracised, which could lead to nine per cent lower seaborne crude oil exports, although this is unlikely as China will likely continue to buy from Russia and other countries may ramp up crude oil supplies to compensate, motivated by high crude oil selling prices.

"We reiterate our 'add' recommendation for MISC, with a higher sum-of-part (SOP)-based target price of RM8.23 from RM7.99 previously," it said.

As at 12.30pm, MISC's share price dropped seven sen to RM7.20 with 686,400 shares traded. 

-- BERNAMA