KUALA LUMPUR (Sept 9): MISC Bhd’s (KL:MISC) full takeover of the FPSO Kikeh, located offshore Sabah, as part of an equity swap exercise has marginal impact to earnings and valuations, analysts said.

The Petronas-linked shipping group on Friday (Sept 6) announced that it is acquiring SBM Holdings SA’s 49% equity interest in FPSO Kikeh, in exchange for its own 49% equity interest in FPSO Espirito Santo located in Brazil.

However, FPSO Kikeh’s “operational life can be extended by 10-20 years more”, considering MISC’s expertise in marine repairs, MIDF Research said.

“Additionally, deepwater FPSOs (floating production storage and offloading units) are built sturdier and more resilient, as deep water exploration and production activities are often done under harsh weather and oceanic conditions; subsequently giving it an advantage in its lifespan,” said the research house, which maintained its target price (TP) for MISC at RM9.75.

Similarly, Kenanga Research, who maintained its TP at RM8.09, said “the impact on the sum-of-parts valuation is immaterial, but will reduce MISC’s exposure to ageing Brazilian assets”.

“The deal is expected to bring a slight profit-after-tax accretion of RM37.2 million, based on our projections,” it said. 

Meanwhile, CIMB Research foresees that MISC’s core earnings for 2025 and 2026 could be diluted, following the equity swap, although it sees the move as “strategic”, as it will result in full entitlement of cash flow and earnings, rather than just 51%.

“We view the acquisition of the remaining stake in FPSO Kikeh as a strategic move, as it will result in full entitlement to the “FPSO’s cash flow and earnings, rather than just 51% after accounting for minority interests,” said CIMB Research, who maintained MISC’s TP at RM10.25.

The FPSO Kikeh, located offshore Sabah, Malaysia, is operated by Thailand’s PTT Exploration and Production Public Company Ltd (PTTEP), in partnership with Petronas Carigali Sdn Bhd and Indonesia’s PT Pertamina, with contract extended to January 2028.

FPSO Kikeh was built in 1974 and converted in 2007, with a production capacity of 120,000 barrels of oil and 150 million per day, and has a storage capacity of two million barrels of oil equivalent.

Last year, Upstream reported that PTTEP began a pre-qualification process to bid for a replacement FPSO at the Kikeh oilfield, as the current FPSO reaches 50 years of age this year, CIMB Research said.

The new FPSO, designed to be smaller than the current vessel, will have an estimated oil production capacity of 40,000 to 46,000 barrels per day, and be equipped to handle up to 90 million cubic feet per day of gas, the report said.

At the time of writing on Monday, MISC shares were down four sen or 0.5% at RM7.88, with market capitalisation of RM35.2 billion.