Transcript

Aug 4, 2026

Summary

Q2 FY2024 saw profits rise 30%-35% year-over-year despite a 10% revenue drop, driven by strong petroleum and Heavy Engineering performance. LNG segment faced lower rates and vessel disposals, while Offshore losses were due to Mero 3 financing costs. Mero 3 first oil is now expected by end-Q3.

Assalamualaikum, and a very good evening, ladies and gentlemen. Thank you for joining our second quarter financial year 2024 analyst briefing. I am Faizaan from MISC Investor Relations team. We are honored today to have with us Encik Zahid Osman, President and Group CEO, Encik Raja Azlan, Vice President Corporate Planning, Encik Effendy Ali, Vice President Group Finance, and Ms. Gul Kiran, General Manager Corporate Planning. Before we begin with the proceedings, I would like to invite Encik Zahid Osman, our President and Group CEO, to deliver a short opening remark. Encik Zahid. Thanks, Faizaan. Assalamualaikum, and a very good evening to everyone. It's good to be back here. I think the last time I had this analyst briefing must be the beginning of last year for quarter one results. It's good to have the chance to engage directly. If you can see the result that we have produced today, for this quarter, it has been a commendable performance by the group, and we have certainly been very happy with what we have achieved today. It reflects on our focus on operational excellence. I mean, discipline in terms of our capital expenditure, and cost and so on. I had the chance to also monitor the market sentiment of MISC Berhad. I think the overall sentiment has been positive, and I'm happy that we can continue that way. I think it's also worth to note that the feedback and the support that you have given to us as a group, and certainly, I'm personally keen. This is the opportunity for us to have more open dialogue for you to ask questions that you have with regards to our performance. For this evening, I think Raja Azlan and Effendy will certainly take you through the details on our business performance as well as on the financial. I will take on the question after that. Happy to do it. Thank you. Looking forward to the engagement today. Thank you, Encik Zahid. Before we proceed to the presentation, I would like to bring your attention to the disclaimer slide. This presentation contains some forward-looking statements with reference to our plans and expectations whereby actual results could differ due to unknown risks, uncertainties and other factors that are in many ways beyond MISC's control. I would like to invite Encik Raja Azlan for his introductory remarks on the quarter's key highlights and business update. Encik Raja Azlan. Thank you, Faizan. Assalamualaikum, and a very good evening to our dear analysts and also investors. As our group CEO mentioned, we have delivered commendable set of results for the second quarter as well as the first half. I am very happy that in terms of the first half results, our profits have increased by 30%-35% in the first half. In terms of cash flow, we also saw about a 33% increase in our quarter-on-quarter cash flow. There was a reduction if you compare to the last year. That was because there was this one-off prepayment received for the early settlement of the FSU. My colleague, Afendy, will provide more details on the financials in the next section. We're also very happy that we were able to continue paying a good dividend, the same amount that we declared in the first quarter. We have declared a similar amount of MYR 0.08 in the second quarter. In terms of ESG, as of the second quarter, we have achieved 5.23 measure in terms of our emissions. This represents about 14% decrease year-on-year, a further 3% decrease quarter-on-quarter. In terms of our big project, the Mero 3 project, which has now been renamed the FPSO Marechal Duque de Caxias. It has successfully arrived at its designated offshore field in Brazil as of the 27th of May. This was a major milestone in the project's journey. To date, we have achieved an overall completion physically of about 97%. The FPSO is now in the key phase of hookup and commissioning, which are the final steps before achieving first oil. Following the achievement of provisional acceptance in end of May, we were prepared to receive the first production riser from Petrobras in July, with the aim of achieving first oil by the 2nd of August. However, due to a technical incident involving the production riser, which was managed by the Petrobras subcontractor, the production riser has yet to be passed to us. We have been informed that the production riser should be delivered by the end of August. We now anticipate that first oil will be achieved by end of the third quarter or at the very beginning of Q4 this year. In so far as MHB, I'm also very pleased to highlight that MHB has secured a second subcontract for an offshore HVDC platform, which further strengthens our position in the renewable energy segment. We also are pleased to highlight that MHB recorded another profitable quarter, reporting profits of about MYR 70 million-MYR 80 million. On AET, I'm very proud to share that AET has been honored with the prestigious Jones F. Devlin Safety Award for 47 of our vessels. This recognition underscores our unwavering commitment to maintaining the highest health and safety and environmental standards across our operations, ensuring the safety and well-being of our crew, our customers, and the environments in which we operate. This award is indeed a testament to the diligence and dedication of our teams in upholding the values that are at the core of our business. Lastly, in terms of our education arm, MMSB. MMSB, the holding company for the ALAM Academy, signed up an MOU with Darussalam Maritime Services to drive advancements in maritime education research and industry practice. This partnership aims to explore mutual interests in the maritime services and products, paving the way for future joint initiatives that will drive innovation and leadership in the industry. Thank you very much. I'll pass back to Faizal. Thank you, Encik Azlan. Next, we'll have a presentation on financial performance by Encik Effendy, followed by a market outlook by Miss Gul Kiran. Encik Effendy, please. Thank you, Faizal. I'll go through some slides on the financials for quarter two for the company, for the group. In general, you will see trending-wise, revenue is down compared to the two quarters of the previous quarter as well as the same period last year. However, the profit trending is actually better. Quickly going through the revenue portion. We have recorded $703 million in this quarter two. That is about 10% down compared to the same period last year of $82 million and 9% down or $67 million compared to the previous quarter. Generally, the reason for the reduction recorded revenue is because the softening of the LNG market, which we see, and hence, the spot charter rates for the LNG vessels is also being impacted by those softening of the LNG market. We do see an uptick on that. Certainly, we hope the LNG market and the spot rates vessels recover towards the end of the year during the winter season. For the reduction in revenue is because the stages of the projects for both our offshore business as well as our heavy engineering business. Profit before tax from operations. We have recorded $132 million, about 7% better compared to the same period last year. That's primarily because of the better rates from the petroleum segment as well as we have managed our cost better from our heavy engineering segment. I would also like to make a note here that for the petroleum segment, we actually have additional 3 vessels, 3 VLCC vessels that is already in operation from quarter three last year, which we did not have same period of last year. Compared to previous quarter, our PBT from operation is slightly down by about MYR 16 million, that's primarily because of the softening of the LNG rates which is kind of expected, because typically the spot rates are a lot higher during the winter season. Okay. PAT, we have recorded MYR 121 million for the quarter. Against same period last year, we recorded about MYR 51 million better. That's primarily because of the reason that I have mentioned earlier on the Heavy Engineering, better cost management in Heavy Engineering, as well as better rates that we have achieved in the petroleum segment. Compared to previous quarter, the main reason why last quarter we showed better PAT is because of a one-off gain on disposal for our LNG vessels, two LNG vessels, as well as one chemical tanker, as well as the better rates that I mentioned earlier on the Gas business. Cash flow from operation. We have recorded MYR 289 million. As mentioned by my colleague, Encik Azlan, when compared to same period last year, there was almost payment for our PSU of about MYR 230 million. That's the part of the explanation when compared to the same period last year. We have shown a better improvement in cash flow for this quarter compared to the previous quarter, primarily because of better collection from our Heavy Engineering segment. Next. I think balance sheet wise, we continue strong balance sheet of about MYR 14 billion. Not much different there. I think I would like to highlight perhaps on the- Liabilities of, particularly the non-current liabilities, there's a reduction of MYR 3.7 billion to MYR 3.2 billion in this quarter or as at June compared to December 2023 because of about MYR 400 million is due in respect of our bond payment in April 2025. That has been declassed as a current liabilities. Okay. Which is Yeah. If you look at our gearing ratio, it's fairly healthy and our debt composition remains very prudent, whereby close to 90% has got a fixed rate, which certainly insulate us from the high interest rate environment that we are seeing today. Next. Cash balance is to show as well as debt balance over the last three periods, which is also quite similar. I just want to note here that slightly lower cash balance as at June is because payments made for our major projects, particularly our. Our debt balance remains similar as the previous three dates that you can see in front of you. Next. Performance by the business segments. I'll start with Gas on the top left quadrant. As I've mentioned earlier, the revenue of Gas is on a downward trend because of the rates that we see, which is associated with the softening of the market. Also to note that we have two less LNG vessels in operation, given that we have disposed two vessels, Portovenere and Lerici, in quarter one this year. That also explain the MYR 7 million non-recurring profit that registered in quarter one, 2024. In respect of the MYR 7 million non-recurring, that's the impairment of our two LNG vessels in this current quarter. For petroleum, revenue remains similar, if not slightly better, which I mentioned earlier, due to the integration of the three VLCCs, Eagle Vellore, that was in operation in quarter three of last year, 2023. Eagle Ventura in quarter four last year. The latest and the final one, Eagle Veracruz, January this year. That certainly help to sustain our revenue, as well as improve our profit in the petroleum sector, in addition to the better rates that we are seeing. Our offshore segment, the revenue is very much associated with the progress of the project. As we expect Mero at the tail end of the project, the POC is slightly reduced, and hence that's the main reason why the revenue has dropped in the current quarter. In respect of the, quarterly, the current quarter loss in the offshore business, that is primarily because the allocation of the financing cost, particularly for the Mero 3 project as well as our GKL, which is the two biggest debt in our offshore business. On heavy engineering, I think we are certainly making a lot of improvement, at least from a profitability standpoint. This year we have registered MYR 16 million in quarter two, primarily because of the better cost management and cost recovery from our client. We certainly will work very closely with our colleagues in MHB to ensure that the results are sustaining moving forward. I think that's all that I have for the financial presentation. Back to you, Faizaan. Thank you, Jeffrey. To Priyan. Thank you, Faizaan. I'm pleased to present our market environment update for quarter two. Let's begin with the LNG shipping sector. During most of the second quarter, the LNG shipping market experienced some performance. This was largely attributed to lower demands in the early months. However, we observed a notable recovery in June. This improvement was driven mainly by two factors. Mainly increased demand in Asia due to the heat phase in the region that we are currently experiencing, and also restocking efforts in key markets engaged in restocking to meet their energy needs. These conditions have resulted in favorable shipping rates, which place us in a strong position to sustain our operating income thanks to our resilient portfolio. Moving on to the LNG project FIDs. Looking ahead, the outlook for FID LNG projects remain optimistic. We expect global liquefaction capacity to grow, which will lead to increased demand for LNG carriers. It is also important to note that while there may be a pause in the U.S. for LNG permits, which has led to some project deferments, the future still looks good and promising. We anticipate at least opportunities from FID projects in the U.S., Qatar, and Mexico. Moving on to the next slide. A surge in LNG demand has prompted a significant increase in new shipbuilding orders, and we see that it will expand by approximately 9% in 2024 and 12% in 2025. Notably, QatarEnergy Phase 2 is expected to account for the majority of the business where we have seen about 45 vessels in the first half of 2024. There could be potential challenges in delivery because of the high workloads at the shipyards as well as bottlenecks in the construction process. Let's turn our attention to the current market environment for the petroleum shipping rates. First and foremost, the overall petroleum shipping rates has remained resilient, and this is bolstered by an increase in the ton-mile demand. We have observed a softening of VLCC rates due to weaker imports from China. On the brighter note, the long-haul exports from the U.S., Brazil, and Guyana present promising opportunities for our sector. The growth rate of the fleet is low, which is expected to help stabilize overall shipping rates. Additionally, there are also opportunities to capitalize on the spot trading market, which could yield favorable results. Looking ahead, we project the charter rates will remain attractive in the second half of the year. Disruptions in the Red Sea have also resulted in truncated supply and stretched voyages, which will keep tonnage utilization strong. The order book to fleet ratio, we saw a rise to 8.4% in quarter two, and the majority of the new orders are for VLCC-sized vessels. It is still crucial to recognize that the current vessels on order will be insufficient to meet future tonnage requirements. On the demolitions and fleet stability, demolitions rates in the petroleum sector is expected to remain weak. As a result of new deliveries and low demolitions in quarter two, has kept the fleet size almost unchanged from quarter one itself. Moving on to the offshore segment. We are also witnessing a steady growth in upstream capital expenditure spending. The complexity and the high costs associated with offshore projects are leading to more collaborations and partnerships with companies, allowing them to share risks and benefits. Operators are particularly focusing on FPSO units in South America and the Asia Pacific regions. It is noticed also that there has been a pause in the FPSO over the past year as companies reevaluate costs and adjust to the new reality of financially driven current projects. That brings me to the end of my presentation about our sector vibrant. Thank you, Ms. Gul Kiran. We will begin the Q&A session shortly. For participants with questions, please use the Raise Hand function. You will read out your name and kindly introduce yourself before asking your question. Each participant may ask two questions in the first round. For further questions, please use the Raise Hand function again. We shall now begin the question and answer session. Okay. First we have a question from Raymond. Go ahead, Raymond. We have a question from Raymond. Raymond? Yes. Okay. Hi. Good evening, everyone. Just to wish Encik Zahid congratulations for being the newest President and Group CEO of MISC. I also recently noted that Dato Arif has taken over as the EVP and CEO of the Petronas Gas and Maritime business. There are two new heads in the maritime segment in both Petronas and MISC. Encik Zahid, could you give us a rundown of what you think are the priorities for MISC under your watch? What kind of business segments would you want to grow into? How would you prioritize the deployment of capital in the next few years under your watch? What are your strategic directions for MISC generally? That would be my first question. Thanks, Raymond. It's good that we do at least hear from you. You are absolutely right. There's two new head when it comes to the maritime within the Petronas group of companies. Dato Arif just being appointed, and he's also looking after the Gas and Maritime business for Petronas too. Coming back to your question on priority for MISC, I think there's no intention to change the current priorities. We will continue focus on delivering our MISC 2030. The focus is certainly about strengthening our core business, as well as to prepare the company for a low-carbon future. In term of the investment, I think it's not going to change. The current priorities remain the same. We have the four core businesses that we have. In term of LNG. I think we are making use and we're going to strengthen further our New Energy and Decarbonization Division agreement. For now, I do expect that it's still the scope because we are committed to deliver MISC 2030. Okay. Thank you very much for that rundown. Okay. Maybe I'll just go through some of the technical questions on the second quarter results. I think the first thing is that for LNG segment, the second quarter profit was actually quite low. Even if you add back the impairment on the LNG assets, it's still very low compared to the first quarter. Not comparing against the previous year, but comparing against the first quarter. I think, Effendy, you mentioned that there were a couple of FPSOs like the Lerici, a couple of LNG vessels like the Lerici and Portovenere that were no longer contributing. I think they were no longer contributing already at the beginning of this year. I'm just wondering why is there a decline in the LNG performance in the second quarter versus the first quarter? Just going on that same vein, Effendy, you mentioned something about offshore dropping into a loss in the second quarter, but I couldn't really hear clearly your explanation, so I would really appreciate that you could repeat that. Also on MMHE, is the cost recovery actually a one-off in nature? Do you expect it to recur in the future quarters? Finally, the AET profits was actually very strong in the second quarter compared to the first quarter, despite the significant decline in spot rates. I'm just wondering how did AET achieve this. Yeah. Thank you. For the LNG segment, yes, you're right. We have lost the two vessels from Portovenere and Lerici at the start of quarter one. We also had, I think, about three or four spot vessels that we are not able to capitalize, i.e. get it higher on a long-term basis. That essentially is a double jeopardy in the sense that we are not able to get our spot vessels on as well as the day rates are also not very good. That's just to provide a bit more clarity in terms of the impact to our gas business bottom line. On the offshore business, the MYR 19 million, I think you're referring to the MYR 19 million loss for offshore business. It's primarily because of the financing allocation that we have allocated to GKL as well as the Mero 3 project. Right? Because these are considered as revenue in nature, right? The financing portion of Mero 3 particularly is a P&L item, and therefore, that is an accounting loss to the, how can I say, the set off against the consumption profit of Mero 3. Therefore, that's why we are showing a loss for the offshore business. Okay. AET and whether we expect cost recovery for MHB on top of more. I think that the remaining question that remains. Yes. I think for MHB, we are working to make sure for the project that has been completed or on near completion, which is Kasawari, GDP, Marjoram, and Jabon, right? It is my understanding that MHB is with the clients to obtain some form of cost recovery. If upon successful of those, obviously MHB will register those in their financials accordingly in the future quarters. Yep. For the future project, obviously, I think that cost discipline and project execution is key to ensure that they continue to be above water or indeed in the black. If I can just add to what Effendy just said on this cost recovery for MHB. I think it is related to a lot of the legacy projects. I think the team is actively pursuing that with the clients, and we certainly making sure that we put ourselves the best chance to make the recovery. So far, we have been successful in one of the recovery. I think we mentioned in the data, if I recall, it's around about MYR 60 million. Okay. I'm not so sure, but we have successful. The focus in the future, we are going to pursue recovery from the legacy project. On AET, I think the market is very supportive of the performance in this sector. I think the crucial part that we have done is that we are able to redeploy the asset that we have into the region where we can capitalize on these high rates. The lightering business also will be very helpful, especially in the Gulf of Mexico. I think that's why you can see a stronger performance for AET in quarter two. Okay, thanks. Going back to the offshore losses, right? Afendy, you mentioned about the financing for the Mero 3. My understanding was from Raja Azlan in the past that the financing is internal in nature, where MISC Berhad is actually giving a loan to the Mero 3 subsidiary. Isn't that usually eliminated on consolidation? I don't understand why it results in a loss. I mean, Raymond, this is basically the cost allocation to the offshore unit. What you find is that at the group level, we're making a higher profit because there's a lot of interest income. Whereas the offshore unit, there is interest cost. Because we are at the tail end of the project, that's why you find that there's no income coming from the Mero project other than the construction profit, which is really at the tail end. That's why now you see this net position of a loss in the offshore unit. I see. If I add back the allocation, will I get a neutral at least? Will I get a zero profit for offshore or will it be positive or still negative? At the same period last year, there was a one-off recovery for some insurance claims. If you're talking about comparing to this time last year. That's why you see the overall results have come down. I know. Just on the absolute basis in the second quarter, if I add back the allocation or is it always being allocated to the offshore side? It is. It will be positive. Yeah. If you take at the group level, those financing is eliminated. How we have shown it, Damon, is those interest costs are allocated to the business where the debt are being utilized by those businesses. Okay. The reason why it went negative is because the construction profit probably went very low, right? That exposed the interest expense to be visible at the bottom line. Exactly. At the tail end, you obviously have a lot more debt. There will be, naturally, the interest cost is going to be higher towards the tail end of the project. Okay, understand. All right. Thank you for taking up so much time. Thanks. Thank you, Damon. Next, we have a question from Ben Shane. Hi, Ben. Go ahead, Ben. Hi, good afternoon. Good evening. Thanks for the call. My first question is just quickly want to follow up on the LNG. I just want to clarify, you have 3-4 vessels on spot that don't have work currently? What's their utilization been, first quarter, second quarter? Just want to understand whether you're seeing them deployed already in the third quarter or are they still off the charter? Yeah, we are getting them employed, but not for the long time for the spot charters. I think the team in the gas business are continuously trying to find homes for those spot vessels. As I said, I think given the rates and the softening of the LNG debt, which make it even more challenging in the second quarter. As I mentioned, and as also shared by my colleague, Titian, that we are seeing an uptick in the spot market for the LNG vessels. We are very hopeful that those vessels can be compacted in a longer-term basis. Sorry, what was the utilization roughly in the first quarter and second quarter? I mean, for the spot vessel, it was roughly about 60%, 56% during the first half. Okay. There was a drop-off in utilization in the second quarter, is what you're saying that explains the drop? Numbers I mentioned was the first half number. Okay. Understood. My second question is with Mero 3. I was under the impression that once you get the provisional acceptance, you're able to start collecting some income. Can you clarify that? Are you maybe already getting paid maybe in the third quarter? What is the revenue situation there? Should we expect the offshore segment to bounce back? Yeah. We will get paid upon first oil. Yeah, that is the situation, and we hope to get that at the very end of this quarter or at the beginning of the fourth quarter. Again, this was beyond our control. The subcontractor of Petrobras, there were some technical issues in terms of the connection of the riser. Okay. I was under the impression that as long as you are already on site and ready, you get some sort of charter. We will be entitled to the standby rates, whatever it is. Okay. Right. That's, you have the standby rate. Should we start to see that at least in the third quarter, even if the first oil is delayed? Should we start to see the offshore segment at least offset those interest costs? Yeah. I think the contract provide for a standby rate for us as the owner of the asset. We are pursuing that with Petrobras. Whether we are able to successfully get that and reflect that in quantity, I think those are the things that we are working with Petrobras. The contract provide for a standby rate. Oh, it's in dispute. Dispute maybe not the right word, but you guys are not on the same page with this standby rate? No, it's not. The contract is very clear, and purposely that. Hello? Yes, Ben. Can you hear me, Titian? Yeah, I lost you there for a moment. Yeah. Just a very quick one. Do you have much room to refinance your debt over the next 12 months, assuming there's rate cuts? Do you have room to maybe bring down your finance costs? I know a lot of it is fixed. Do you have room to be tactical here? Yeah. Ben, we are looking at all options at this point in time. Obviously, we have to look at what our capital requirement in the next five years. Until we can finalize those, we will look at what are the financing options that will correspond to the capital plan that we have in the next few years. We certainly would like to take advantage, as you said, given the expected reduction in the rates, to perhaps tap the financial market to enable us to our business further. Got it. Thanks. I'll jump back in the queue. Sorry, Ben. Maybe we just want to clarify on the standby rate just now because there was a cut in the line. What we're saying is that the contract is very clear that we are entitled to the standby rate, and we're working together with Petrobras through these final steps to ensure that we can get the final hookup. Thank you, Ben. All right. Thank you. Next, we have another question from Raymond. Hi. Thanks, Haizan. Just going back to the Mero 3. I think generally after provisional acceptance, there is a month or two that you have to wait prior to getting the standby rate. Would that be correct? I wanted also to check whether, because the Mero 3 was delivered late to Petrobras, is there any financial settlement that you will have to make to Petrobras? Is that still under discussion? Is that even a possibility of that happening? The last question on Mero 3 is what was the profit that was booked in the second quarter? Thanks. Sorry, what was the construction profit that was booked? On the delays, we have already taken on board the full extent of the delays back in 2022. Now we are in discussions with Petrobras to improve the position. We hope that we will be able to get some recovery from so far as the delay effect is concerned. You have provided for it already, right? If anything, it will be a positive write back, is it? That's right. Okay. That's good then. Sorry, you are asking for the Mero 3 percentage profit? That's about $4 million. Okay. Sorry, can you repeat? For the quarter. Yeah, for the quarter, it's about MYR 4 million for Mero 3. MYR 4 million. MYR 4 million. Yeah, MYR four. $4 million US dollars. Okay. When does your standby rate technically kick in based on the contract? Would it kick in, let's say, by August? By this third quarter. It will be entitled to the standby rate by this quarter. By this quarter. Okay. Yes. Okay. Sure. For the whole of this quarter or for part of this quarter? Towards the latter part of this quarter. Latter part of this quarter. All right. Okay. Sure. Okay. Before I pass back to Ben, could I just ask a little bit about the LNG side? LNG impairments have been made consistently over the past couple of years, every couple of quarters. I presume that these are being made for the steam turbine vessels. Based on what kind of assumption are you using to make these impairments? Are you assuming that the steam turbine vessels will be sold as scrap at the end of the 20-year lease? Or will there be some kind of redeployment opportunity and you're assuming some kind of spot rate for the post 20 years of the fixed time charter? Also, I was just looking through the CII ratings for the LNG steam turbine fleet. I think Success has published it for 2023, I think most of the steam turbine vessels are rated either D or E, a couple of them are rated E. I do know that for vessels rated E, you're not supposed to be able to trade them this year. Could you give me some idea what are your strategies there to address the D and E ratings for the CII? Thanks. Let me try to answer the last question first. For the CII, the rating E and D, the owner can still treat the vessel, there needs to be a clear plan how we could improve that position. That is the current requirement by the regulation. It's not that you cannot treat it immediately. For CII E ratings, I think you have within 12 months to make the improvement. For CII rating D, I think you have within 24 months, if I'm not mistaken, for you to make that improvement. It's not immediately you cannot treat the vessels. Yep. If you make improvements of this E vessel, so you either have to incur paybacks or you have to slow down the vessel. I think slowing down steam turbine vessels are probably going to cause even more pollution. There are a number of elements we can do either operationally, to deal with it, or we certainly need to put in CapEx and input an improvement. An example that I can give you for the petroleum assets to improve some of the older vessels in terms of the emission, we are using biofuel to blend in with our current conventional fuel to improve the emission level. Okay. I think maybe we should sit down on one of these days to talk about this in greater detail. I think the CII ratings are rather stark in terms of the steam turbine, it's not unexpected either. Just on the impairment question, Raymond. The methodology of assessing the impairment of the LNG vessels is, obviously we look at the book value, compare that against the value in use. Value in use is specifically what contractual arrangement that we have existingly for that particular vessel, and compare that against the market value of the vessel, which we get from a published publication, right? If the net book value, so if I should say, compare that against the higher of the value in use and the market value, right? Then that number is compared against the net book value. Any difference or any deficit, that is the amount that we flush out into the P&L for that particular vessel. Yeah. For the value in use, do you assume that the vessel will continue trading in the spot market? No. Value in use is whatever contract that we have existing for that particular vessel. Okay. For the LNG vessels that are coming off the long-term 20-year charters, what do you assume will be the value in use on the 21st year onwards? That one we will take the long-run rate. Post the charter period, we assume that that will be utilized in the spot market at the long-run rate. Okay. Until the 40th year? No, until the 25th year. 25. Yeah. Oh, 25. Okay. You assume that the vessel will only be operating for a further five years. Yeah a scrap value at the end of the 25th year. That's right. I see. Okay, sure. Thank you. Thank you, Raymond. Next, we have a question from Jeremy Yap. Go ahead, Jeremy. Hi. Just in regards to your standby rates for Mero 3. Are you guys able to disclose what is the standby rate proportion in terms of full double charter rate? No, we can't because that is confidential under the charter contract. Apologize for that. All right, I'll just move on. Are you able to probably guide us on the term to spot ratio for both your LNG division and also petroleum tanker? It's about 90% for the petroleum and about 80%-85% for the gas. For terminal. Okay. Just final question from me. Other than the Kelidang FPSO, which is a PETRONAS job, is MISC still bidding for other FPSO jobs given the current strong global FPSO demand? No. I think at the moment we want to complete the Mero job. Get it hooked up. Also, as we mentioned to you before, we're trying to also divest a stake in the Mero project. Also we mentioned that for any big project, we will only pursue it if we have a partner. Understand. Meaning the precedent starts with a stake sale first, then only you guys will look into probably a joint venture or so into a new FPSO job. Am I right? For the MYR 2 billion kind of project. Okay. The precedent starts with the stake sale. Yeah. That's right. All right. Okay, that's all from me. Thank you. Oh, wait. One last one. I know this may be a little bit juicy, but I think it's all over the news that you guys may be taking over Bumi Armada. Are you guys able to give us some color on this? I think we have made a statement in the past to answer that question. I think for us in MISC, we are committed to deliver our MISC 2030 aspiration. That is our guidance when we explore all opportunities. I think when we have anything material, we will certainly make the right announcement for you, Jeremy. I assume it's not all just rumors and it's not out of the cards, yeah? Sorry, Jeremy Yap, can you repeat that? I assume it's not all just rumors and it's something that may happen, right? As I said, we are committed on our MISC 2030, and we explore all opportunities to pursue that, to achieve that. When there is a material opportunity that we are ready to disclose and we need to disclose, we will state that in a timely basis, Jeremy Yap. Okay. Thank you so much. Thank you, Jeremy. Next, we have Ben. Go ahead, Ben. Hi. Maybe, if you don't mind, I want to ask what Jeremy asked but in a different way. Obviously, capital allocation is really important. In fact, it looks like you're a bit constrained, right? Because you're tied up with Mero 3 even. You need the monetization to free up capital. When it comes to exploring potential acquisitions like this, putting aside a specific name, what are the kind of considerations that, what kind of hurdles would this need to pass to be a sensible acquisition? I'm thinking, in specific case of this kind of FPSO, would you even bother acquiring a company, or would you prefer to just acquire assets? Just want to understand how you would approach, let's say, a hypothetical opportunity like this. This Ben, right? Ben, I think it is very difficult to answer a hypothetical question with a hypothetical answer. I don't think we are going anywhere. What I can say is that we are certainly going to maintain our capital discipline with regards to what investment that we want to do, what opportunity that we're going to pursue. That's number one. Second, I think we have advised, you and the market with regards to what we are doing with the equity that we have. We are pursuing our partners, and we will continue that. For us, it's important once the asset is in operation, we are able to recycle the capital so that we can continue and pursue new opportunity. The opportunity has to match our ambitions to grow and achieve our MISC 2030. We have a core business that we want to continue to rejuvenate, which is different sector, both gas and petroleum. We also have our offshore business as well as our business in MSP. I'm afraid the answer is not that clear what your intention is. I do appreciate maybe it's hard for you to tackle this head-on. I just want to point out that, I think the perception is quite negative, I think, based on feedback. If this kind of acquisition goes ahead, of course everything depends on price, but it would look like you guys are detracting a bit from your capital discipline now that you talk about. Hopefully, at some point you can provide more clarity. I think that would be helpful, so I'll put it to bed. Yeah, Ben, maybe to give you comfort Yeah what it is, we will stay true to our financial discipline. Which is number one, we have got our gearing constraint. If we are going to pursue any transaction, it would have to be earnings accretive, it would have to be cash flow accretive because we need to ensure that we are able to deliver dividends, sustainability, and on a growth trajectory to our shareholders. Any transaction, any corporate exercise, whatever we do, will need to be something that makes sense. If you're talking about big transaction, even more so because we will need to go to the shareholders to seek approval from the shareholders. Don't worry, Ben. Our discipline remains intact. It is the cornerstone of our performance so far. All right. Thanks. I like the answer. Thank you. Thank you, Ben. Next, we have a question from Ho Meng. Ho Meng, hi. Go ahead. Can you hear me? Yes, we can hear you, Ho Meng. Hi. Yes. You have a question? Hi. Yeah. For last question on the Mero 3, you said that the subcontractor is still waiting for subcontractor to replace. It's a replacement of the risers, right? Because from what I can find on web sources, the umbilicals and all those were already installed in July. Ho Meng. Yeah. Sorry. Could you repeat your question, please, and a bit louder? We could not hear you. It's a bit muffled. Okay. Yeah. Is it loud and clear? Okay, go ahead. Yep. Just want to double-check on the riser that you mentioned. It was a replacement of the risers, right? It was previously already installed, I think in around July. I think there is a replacement needed, and therefore, you are waiting the subcontractor to complete that. Is that correct? When Ho Meng, let me just try to your question is related to the Mero 3 stop and commissioning activity at the moment, and why is delayed. Is that correct? Yeah. Is it confirmed that it is the risers that will need to be replaced? I think they were already installed earlier. Based on what you said, you are waiting for the subcontractors to replace the risers. When the Mero 3 arrive at site, we proceed with our hookup on the mooring lines and the tension line. That's completed. We already get the certification from the class for that. What is currently delayed is on production riser that is managed by Petrobras contractor. I think there is some technical account, and that is the one that's causing the delay. Because of that, we were not able to achieve first oil as what we initially planned in early August. Okay. I'm assuming that they need to do some replacement and all those things. Anyhow, it won't come at any additional cost to you, right? Or, yeah. No. I think as we said, it is the production riser, it basically belong to a Petrobras, and it's managed by their contractor. That's the one that is currently causing the delay. They were not able to deliver the risers so that we can hook up on Mero 3. Got it. In the LNG side, you mentioned about Porto and Lerici. The disposal, was it done in May? The sale. The impairment that you recognized in this quarter, is this solely for those two LNG vessels? Ho Meng, can you repeat that, please? The Porto and Lerici, the disposal, was it done in May? The impairment that you recognized, that MYR 30-plus million, is that wholly for those two vessels? Yeah. It was, I think, the early part of this year. Ho Meng. Yeah. The completion of the sale was in May, right? I think you were offering for sale since early the year. The sale was done in quarter one, and the gain on disposals was recorded in quarter one for me. Oh, right. This quarter is for which vessel? There is a gain on disposal. There's no disposal quarter. Oh, sorry. That was in quarter one. All right. Okay. Correct. The non-recurring item in quarter two relates to the impairment of the current vessels that we have. It's not a disposal. Okay. In the LNG income, how much of it would have been coming from your existing fleet? Because you mentioned that you have two lesser fleet. Yes. Also, your other existing fleet, because some of them were going on spot charters, the income was also lower a bit because of low utilization and also lower spot rate as well. Can you maybe quantify how much of it was due to the loss of the Lerici and Porto, and how much of it is the difference from your existing fleet last year and this year? You are trying to ask if we can quantify the difference between last year and this year performance. One is due to Porto and Lerici. Yeah. The other one is due to disposal of asset, was it? Yeah. Due to the performance of the remaining fleet other than Lerici and Porto. Yeah. I don't think the analysis is really here, Ho Meng. Okay. I understand what you're trying to compare performance and this year, if we remove the Porto and the Lerici from the equation. I have one more question to ask. If I'm not mistaken, during when you were selling Porto and Lerici, there was some news out there that says that you had to do extensive repairs on those two vessels because there was some contamination on the tank or something like that. Are those costs substantial? Were they material? If yes, how much were the costs incurred? Yeah, those repairs were taken in previous years. Ho Meng. In previous years, we had to incur a lot of repair costs for these two vessels. Even if to the point when you are doing the sale, you already have repaired all the problems previously, right? Yeah. All those costs for these two vessels are all prior year issues. All prior year issues. Yeah. There's none incurred in quarter one of this year. No. I see. Okay. I think that's all I have for now. Okay. Thank you, Ho Meng. I think we have time for just one last question. We have time for one last question. I would like to invite Raymond. Yes. Hi. Thanks for the privilege. Okay. I wanted to ask about the trade receivables. There's a large portion of it that is past due more than 90 days. What is it actually? I can see that it's in previous years as well. That is basically related to our GKL arbitration. Oh, right. I see. Okay. Understand. You just left it there, whatever amounts that is currently under legal arbitration. Yes. Understand. Okay. Also, Trade News reported that you have signed a letter of intent with Samsung Heavy Industries for possibly two LNG ships for charters of Petronas. Could you give us some color on that? I mean, I won't be able to comment on that because I'm not aware of that, the letter of intent. Is it? Yeah. Supposedly, there was a letter of intent that you signed with Samsung Heavy Industries for the construction of two LNG ships. There was no announcement from you guys, I just wanted to double-check whether it's true or not. Yeah. If we sign any material contract like that, we will make the necessary announcement, Raymond. Okay. Sure. All right. Thank you very much. Thank you, Raymond. I think this concludes today's conference call. On behalf of MISC Berhad, we thank you for your participation. The PDF version of our presentation slides has been sent to the attendees of the call and will be made available on our corporate website. To the sell-side analysts, please forward a copy of your published research report to the MISC IR team for our reference. Thank you again, everyone. Stay safe and have a good evening. Thank you, everyone. Thank you.