MISC Berhad was incorporated in 1968 as Malaysia International Shipping

Corporation Berhad and is the leading international shipping line of Malaysia. In

September 2005, Malaysia International Shipping Corporation Berhad adopted its
present corporate identity and changed its name to MISC Berhad. Its main
shareholder

is

Petroliam

Nasional

Berhad

(PETRONAS),

the

national

oil

conglomerate of Malaysia. The principal business of the Corporation consist of Ship

owning, Ship operating, Other shipping related activities, Owning and operating of
offshore floating facilities as well as Marine repair, Marine conversion and
Engineering & Construction works. With a modern and well-diversified fleet of more
than 120 vessels and a combined tonnage of more than 13,000,000 DWT.
MISC is a specialist in Energy Transportation. The company HQ is located at
Menara Dayabumi in Kuala Lumpur, Malaysia. With 27 LNG carriers, it is currently
one of the worlds leading operator of LNG fleet. Through its wholly owned subsidiary
AET, MISC is one of the leading global tanker operators and a market leader in
lightering operations for US Gulf ship-to-ship transfers. MISC also delivers freighting
solutions for vegetable oil and chemical products to various corners of the globe, with
major trading routes that include South East Asia, the Far East, Middle East, Europe,
the Indian Subcontinent and the Americas.
The company has also ventured into offshore business, offering customers a
full scope of offshore floating facility services from design to operations. Through
Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE), MISC provides marine
repair, marine conversion, engineering and construction for a wide spectrum of oil &
gas production facilities.
On 24 November 2011, MISC announced its exit from the liner business
(container shipping). In its announcement through the local Bursa Malaysia stock
exchange, MISC explained that the radical change in the operating dynamics of the
liner industry which is driven by high operating cost and rapid changes in global trade
patterns is challenging the validity of today's operating models. The company's
decision was also hastened by the present difficult operating conditions which have
seen the liner business suffering a total financial loss of USD789 million over the past
three years, impacting the overall financial performance of MISC.

1.0 STRENGTHS

1.1 Strong market position

MISC has a strong market position and is one of the largest shipping conglomerates in the
world in terms of market capitalization. With 27 LNG carriers, it is currently one of the largest
single owner/operator of LNG fleet in the world. Through its wholly owned subsidiary AET,
MISC is one of the leading global tanker operators and the third largest owner-operator of
Aframax tankers in theworld. The group also holds the leading market share of the US Gulf
ship-to-ship transfer businessthrough its lightering operations. In addition, the group has
wide presence and considerable marketposition in various industries, including chemical
shipping, petroleum shipping, container shipping,offshore business, marine and heavy
engineering business, integrated logistics business, tank terminal business and fleet
management business. Hence, a strong market position in diversified business segments
enhances the brand image of the group, while increasing its revenue base.

1.2 Robust financial performance

MISC recorded growth in both sales and profits in FY2012.The group recorded revenues of
MYR9,484 million ($3,082.5 million) during FY2012, an increase of 31.2% over FY2011.
Similarly, the operating profit grew by 6.4% to MYR1,717.1 million ($558.1 million) in
FY2012. The net profit of MISC more than doubled to MYR1,394.5 million ($453.2 million) in
FY2012 , compared to MYR590 million($191.7 million) in FY2011. The groups net margins
also grew strongly in FY2012. The groups netprofit margin improved to 14.7% in FY2012
from 8.2% in FY2011. Furthermore, the group witnessed strong growth across all geographic
regions in FY2012. During the year, Malaysia (representing 60.5% of the total revenues)
grew by 38.2%), while revenues from the Americas, Asia and Africa, Europe, and Australasia
grew by 22%, 11.3%,39%, and 43.9%, respectively. Thus, strong financial performance
across all geographies enhances its shareholder's value and allows the group to fuel its
expansion plans.

2.0 WEAKNESSES

2.1 Highly indebted

MISC is highly indebted. At the end of FY2012, the group had total long term borrowings of
MYR6,507.1 million ($2,114.9 million). In addition to this, the group's total debts stood at
MYR 9,371.9 million ($3,046.1 million) in FY2012. This heavy debt could force MISC to
allocate a considerable portion of cash flows from operations to debt service payments and
also limits its ability to obtain additional financing. The groups interest expenses stood at
MYR491.2 million ($159.6 million) and MYR351.6 million ($114.3 million) in FY2012 and
FY2011, respectively. The groups high level of debt obligations could impact its ability to
obtain additional financing to support its expansion plans. In addition, it could also lead to the
diversion of its cash flows from operations and expansion plans to service the fixed
obligations. This in turn places MISC at a possible competitive disadvantage compared to
competitors that have better access to capital resources.

2.2 Geographic concentration

Although MISC has expanded to other international regions, it still depends on the Malaysia
market for majority of its revenue. In FY2012, the group generated about 60.5% of its
revenue from Malaysia. This over-dependence on the Malaysian market may have a
dampening influence on the group's revenues if the economy and/or the group's sales in
Malaysia do not grow as expected. High dependence on the domestic market may restrict
MISC's income growth to the local economy. It makes the group susceptible to changes
associated with the economic and political situation of the country. Thus, the group's high
reliance on one market exposes it to the risk of downturns in the country's macroeconomic
conditions and amplifies its business risk.

3.0 OPPORTUNITIES

3.1 Strong outlook for the global marine freight market

The global marine freight industry has been growing since 2010 after a period of decline in
the previous two years. Further, the future forecasts indicate consistently solid rates of
growth up-until and including 2015. According to MarketLine (a unit of Informa plc), the
global marine freight industry generated total revenue of $427.1 billion in 2012, representing
a compound annual growth rate (CAGR) of 6.5% between 2010 and 2012.

Furthermore, the performance of the industry is forecast to remain strong, with an

anticipated CAGR of 6.2% for the three-year period 2012-2015, which is expected to drive
the industry to a value of$511.8 billion by the end of 2015. MISC has a robust presence in
the marine freight market. The group owns and operates ships, tank terminals and offshore
floating facilities. It operates a fleet of crude and product tankers from London, Singapore,
Houston and Gurgaon in India. MISC also offers freighting solutions for vegetable oil and
chemical products. The group has presence across major trading routes, including South
East Asia, the Far East, Middle East, Europe, the Indian Subcontinent and the Americas.
Thus, the accelerating global marine freight market could further boost demand for MISCs
services, which in turn would boost the groups revenues and margins.

3.2 Growing oil and gas transportation market

The group is well poised to benefit from the growing oil and gas transportation markets.
According to industry sources, the global oil and gas storage and transportation industry is
forecasted to experience accelerated revenue and volume growth after a period of sharp
decline in 2009 and slow growth in 2010. However, the oil and gas storage and
transportation market is expected to rebound and grow at an anticipated CAGR of 7.8% for
the five year period 2012-17. MISC has a robust presence in the global oil and gas
transportation sector. The groups energy related shipping segment offers liquefied natural
gas (LNG) services, petroleum tanker services, and chemical tanker services.The group
operates a fleet of more than 160 owned and in-chartered vessels with a combined tonnage
of approximately 15 million dead weight tons (dwt). Through its petroleum arm AET, MISC
provides global seaborne transportation solutions to the international petroleum industry. It

operates a fleet of crude and product tankers from the London, Singapore, Houston and
Gurgaon in India. It also has on order four very large crude carriers (VLCCs), four Suezmax
tankers and two DP shuttle tankers. Moreover, MISC through its joint venture with Vitol
operates tank terminals globally with a total of approximately 7.8 million coalbed methane
(cbm) of tank storage capacity across 12 terminals in 11 countries. Thus, MISC is well
positioned to capitalize on the growing global oil and gas transportation industry.

4.0 THREATS

4.1 Intense competition in the shipping industry

The shipping industry across the globe is highly competitive in nature.This market consists of
several multinational companies including A.P. Moller-Maersk, Hanjin Shipping, Kawasaki
Kisen Kaisha, Malaysian Merchant Marine, Mitsui O.S.K. Lines, Neptune Orient Lines,
Nippon Yusen Kabushiki Kaisha, and Overseas Shipholding Group. Each of these
companies offers a comprehensive range of services through a global platform. As a result,
pricing pressures on freight rates are intense and maintaining low delivery time is a crucial
determinant of the success or failure of firms operating in this field. Product differentiation is
low, and players seek to differentiate their services by offering faster delivery times and
extended services to attract market share. Moving forward, the market also faces significant
cost pressures, including freight rates and rising fuel costs. Moreover, large players are also
investing in higher capacity vessels to carry high volumes and to optimize delivery times, a
key metric of efficiency. Intense competition may thus put additional pressures on the
groups operations and could adversely impact MISCs performance.

4.2 Increasing bunker prices could impact revenues

The market price of bunker is generally linked to the price of crude oil, and any increase in
bunker prices has a negative impact on earnings for MISC. According to industry estimates,
during 2012, the bunker price reached $672 per metric ton and is expected to grow higher in
the coming years. It is estimated that in 2013, the average bunker prices would grow by
2.7% to reach $690 per ton. Moreover, it is estimated that the bunker costs would average
$760 per ton by 2017. Bunker oil prices account for a substantial portion of the costs MISC
incurs in the liner trade, bulk shipping, and air cargo businesses. The group may not be able
to pass on all the costs of bunker fuel price increases to customers through rate hikes or fuel
surcharges. Consequently, a rise in fuel costs could distress the group's business, financial
condition, and operating performance.

4.3 Piracy threat to maritime shipping

Amidst the global war on terror, international attention has largely been focused on terrestrial
operations, but the sea remains a fertile ground for attack. According to the International
Chamber of Commerce (ICC) International Maritime Bureau (IMB) global piracy report, in the
first three months of 2013, four vessels were hijacked, 51 vessels were boarded, seven were
fired upon and four reported attempted attacks. In the Gulf of Guinea 15 incidents were
reported, including three hijackings. Nigeria accounted for 11 incidents in the region. Also, an
offshore supply vessel with 15 crew members was also hijacked. A further 14 crew were
kidnapped from four different vessels in Nigeria. On the eastern side of Africa, Somalia
recorded five incidents, including the hijacking of a fishing vessel and its 20 member crew. In
the Indian Ocean, two vessels were fired upon. There were also two attempted attacks
against A framax sized tankers in the Gulf of Aden. The shipping companies are faced with
the risk of paying a ransom in return for its ships. Such attacks could impact the operating
structure of the group, thus negatively affecting the overall business of the group.

http://www.misc.com.my/2011-@MISC_Announces_Its_Exit_From_The_Liner_Business.aspx