Periodic/Sector reports
Oil & Gas: Evolution Of LNGC Supply Chain
Highlights
- Takeaways from our recent tour of Samsung Heavy Industries (SHI). Under the invitation of MISC (MISC MK/BUY/Target:RM9.50), we visited its LNG carrier (LNGC) Th’ailib that was on track for delivery in the SHI yard, While retaining its strategic relationships with the Big Three Korean yards, MISC has responded to the changing yard landscape by adding China to its yard procurement strategy.
- Diversification is positive for MISC. We think it is the right move for MISC to utilise all available berth slots to achieve scale and leverage with a new yard player, and it does not diminish MISC’s existing yard relationships, given that SHI is still doing higher-value orders for the wider Petronas group. There may be potential collaboration between regional yards and Malaysian listed players including MMHE (early partnership with Hanwha) and Muhibbah Engineering, which may potentially revive their depressed valuations that currently stand at <0.5x P/B. Overall, retain sector MARKET WEIGHT.
Analysis
- MISC is a highly important, long-standing client of SHI. Being a major LNGC shipowner, MISC maintains strategic relationships with the main Korean yards, ie Samsung Heavy Industries (SHI), Hanwha Ocean (HWO; formerly Daewoo) and Hyundai Heavy Industries (HHI) (collectively, the Big Three). SHI is constructing five LNGCs newbuilds for MISC. Three of the LNGCs were secured by MISC in early-24 under 15-year time charters for QatarEnergy. The other two LNGCs are under 15-year charters for Petronas LNG. SHI is also building MISC’s US$330m maiden FSRU with a contractual delivery target of Feb 29. The FSRU will work for Petronas Gas for 20 years.
- The relationship goes beyond traditional buyer/seller and covers green shipping. MISC and SHI are co-engineering partners for the world’s first design of an ammonia-fueled tanker utilising fuel cells (with proton exchange membrane technology developed by Vinssen). This secured an approval in principle (AiP) from Bureau Veritas in Sep 25, although we understand there are no commercial orders being made at this juncture. MISC and SHI collaborated in 2023 to advance a floating CO2 storage unit with injection capability (FCSU-i), which secured AiP from Det Norske Veritas (DNV).
- LNGC Th’ailib commences the next generation of MISC’s LNGC fleet. The 6 Oct 26 naming ceremony of Th’ailib (derived from the Arabic word for fox) The name solidifies a far more meaningful connection between a modern LNGC and a nation’s future energy ambitions. Th’ailib is also historically important for MISC, being the first among three of QatarEnergy Phase 2 (QE2) LNGC newbuilds, whereby MISC participated entirely on its own via subsidiaries Polaris LNG Five, Six and Seven respectively. In Phase 1 (QE1), MISC participated as associate partner under a consortium for 12 LNGCs.
Highlights
- Takeaways from our recent tour of Samsung Heavy Industries (SHI). Under the invitation of MISC (MISC MK/BUY/Target:RM9.50), we visited its LNG carrier (LNGC) Th’ailib that was on track for delivery in the SHI yard, While retaining its strategic relationships with the Big Three Korean yards, MISC has responded to the changing yard landscape by adding China to its yard procurement strategy.
- Diversification is positive for MISC. We think it is the right move for MISC to utilise all available berth slots to achieve scale and leverage with a new yard player, and it does not diminish MISC’s existing yard relationships, given that SHI is still doing higher-value orders for the wider Petronas group. There may be potential collaboration between regional yards and Malaysian listed players including MMHE (early partnership with Hanwha) and Muhibbah Engineering, which may potentially revive their depressed valuations that currently stand at <0.5x P/B. Overall, retain sector MARKET WEIGHT.
Analysis
- MISC is a highly important, long-standing client of SHI. Being a major LNGC shipowner, MISC maintains strategic relationships with the main Korean yards, ie Samsung Heavy Industries (SHI), Hanwha Ocean (HWO; formerly Daewoo) and Hyundai Heavy Industries (HHI) (collectively, the Big Three). SHI is constructing five LNGCs newbuilds for MISC. Three of the LNGCs were secured by MISC in early-24 under 15-year time charters for QatarEnergy. The other two LNGCs are under 15-year charters for Petronas LNG. SHI is also building MISC’s US$330m maiden FSRU with a contractual delivery target of Feb 29. The FSRU will work for Petronas Gas for 20 years.
- The relationship goes beyond traditional buyer/seller and covers green shipping. MISC and SHI are co-engineering partners for the world’s first design of an ammonia-fueled tanker utilising fuel cells (with proton exchange membrane technology developed by Vinssen). This secured an approval in principle (AiP) from Bureau Veritas in Sep 25, although we understand there are no commercial orders being made at this juncture. MISC and SHI collaborated in 2023 to advance a floating CO2 storage unit with injection capability (FCSU-i), which secured AiP from Det Norske Veritas (DNV).
- LNGC Th’ailib commences the next generation of MISC’s LNGC fleet. The 6 Oct 26 naming ceremony of Th’ailib (derived from the Arabic word for fox) The name solidifies a far more meaningful connection between a modern LNGC and a nation’s future energy ambitions. Th’ailib is also historically important for MISC, being the first among three of QatarEnergy Phase 2 (QE2) LNGC newbuilds, whereby MISC participated entirely on its own via subsidiaries Polaris LNG Five, Six and Seven respectively. In Phase 1 (QE1), MISC participated as associate partner under a consortium for 12 LNGCs.
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