A very good evening, ladies and gentlemen. Thank you for joining our first quarter financial year 2024 analyst briefing. I am Faizan from MISC's Investor Relations. We are honored to have with us today, Captain Rajalingam Subramaniam, President and Group CEO. Encik Raja Azlan Shah Raja Azwa, Vice President Corporate Planning. Encik Afendy Ali, Vice President Group Finance, and Encik Mohd Khairul Izzad, Senior General Manager, Group Finance, and Ms. Gurkiran Kaur , General Manager Corporate Planning. Before we begin the proceedings, I would like to invite Captain Rajal ingam, President and Group CEO, to deliver a short opening remark. Captain, if you please.
Thanks. It's going to be a very short one. Hello, everyone, clients, friends, colleagues. Hope everybody is well. Welcome to our analyst briefing for our financial results. Hope everybody is well. Without further ado, I pass it back to Faizan, and then we can have the major conduct of the day in terms of briefing and clarifying questions that we have from our colleagues.
Thank you, Captain. 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. Thereby, actual results could differ due to unknown risks, uncertainties, and other factors that are in many cases beyond MISC's control. Now I would like to invite Encik Raja Azlan for his remarks on the quarter's key highlights and business updates. Encik Azlan.
Thank you, Faizan. A very good evening to our friends and colleagues from the analysts and the buy-side community, as well as our rating agencies. It's good to see you again. I'll basically talk a bit about the highlights, in the first quarter. Overall, we are very happy with our results, in the first quarter. In terms of the financials, you can see that revenue has increased by 10% year-on-year. Our profits also have recorded about 15% year-on-year and about close to 20% quarter-on-quarter. In terms of our adjusted CFO, there is a slight dip due to timing differences primarily from MHB. In terms of, we received the recoveries in Q4 last year, but the spend or the repayment of the vendor sum was made in Q1.
If you adjust for that, we are looking at about 35% reduction in adjusted CFO Qo Q. In terms of dividend payout, the dividend payout that you see here is in relation to the MYR 0.12 that we declared in Q4 last year. In Q1, the board has graciously declared a dividend of MYR 0.08 per share, and this is in line with our normal payout ratios. I think more importantly, I'd like to talk a bit about the strides that we are making in ESG. Firstly, in terms of emission reduction, we are very proud to say that we are progressing towards the targets that we have set for us by 2030. As at the first quarter, our emission reduction is at 5.38%, which is about 8% what we have reported in Q4 last year.
We are making very good progress in that sense. In terms of fleet rejuvenation also, we are very pleased to share that we have, for the gas business unit, we have signed new long-term TCPs with QatarEnergy on the 31st of March for three new build LNG carriers, and this lays the foundation to make further progress on our fleet rejuvenation. AET also successfully delivered the third and final LNG dual-fuel VLCC, the Eagle Veracruz, in January of this year to Shell Tankers. This is the third VLCC that began with Eagle Vellore in August of last year. In terms of ZEVs, zero-emission vessels, we are very proud that we announced on the 19th of April that AET signed a TCP contract with PETCO Trading in Labuan for the world's first two ammonia dual-fuel eco Aframaxes.
This is a very significant milestone in our journey to transition towards ZEVs. We're taking basically a first-mover position and leading the way to help the company to achieve net zero by 2050. Before that, 50% reduction by 2030. In terms of awards, we are very happy that AET was awarded the Euromoney Islamic Finance Award in Dubai last week, in relation to our USD 100 million sustainability-linked RCF facility from Maybank Singapore. This is a significant recognition for the first of such kind of facility in the shipping industry in Southeast Asia, demonstrating both Maybank's and AET's commitment to the net zero journey. In terms of Mero 3, something that is very close to our hearts and is very close to the hearts of our investors and shareholders.
We are very proud that we achieved a major significant milestone. Firstly, the asset sailed away. The FPSO Marechal Duque de Caxias sailed away from Yantai Yard to the Mero field in 24th of February of this year. It has arrived at the field, and it has received the provisional acceptance on the 27th of May, just a couple of days ago. The next step will be to proceed hookup and commissioning, which will take about two months or so with first oil scheduled to be achieved by Q3 of this year. I'd also like to give recognition to our maritime academy, MMASB, which is the holding company for the ALAM Academy.
It signed an MoU with the Yayasan Sarawak as well as University of Technology Sarawak on the 23rd of February, which aims to foster collaboration and sharing our expertise and resources and exchanging knowledge to produce and drive purposeful partnerships to enhance the maritime education and industry development in Borneo and the wider region. A bit more about our segments. In terms of the gas segment, we are focusing on progressing our fleet rejuvenation strategy, as I mentioned just now. There will be other upcoming new builds. The 12 new builds coming out of our joint venture for QatarEnergy, where we have got a 25% stake. This will be over the next, from 2025 to 2027. We've got another two vessels coming up for SRM.
All of these vessels will be equipped with the latest cutting-edge technologies designed to reduce emissions so that in total is about 19 vessels together with the QE contract that we just signed in the first quarter of this year. We are very bullish about the gas market. We believe that we have got another two cycles in terms of investment into energy carriers. We believe that the gas market will peak between 2037 and 2040, it will double. Demand will double before it plateaus around 2024. It is dependent on the pace of growth in renewables. The near-term prospects for the LNG shipping market remain positive, propelled primarily by Asian LNG demand and also increasing investments in LNG infrastructure. Moving on to the petroleum unit. Crude tanker earnings remained strong in the first quarter.
Average quarterly earnings for the three segments were north of MYR 50,000 a day. Today over 90% of our vessels are operating under term charters, which are very beneficial to provide secure income stream to the petroleum unit. Is also reflected in the results of the petroleum unit. Moving forward, our capital expenditure will focus on dual-fuel assets, dual-fuel LNG as well as dual-fuel modern tankers. The outlook for the year remains positive. We believe with favorable tankers and demands. The segment will continue to identify opportunities, particularly in the dual-fuel sector, to focus on building that long-term secured income. For the OBU sector, as I mentioned just now, we are very proud to share the achievements relating to Mero 3 or more. The name is now been renamed FPSO Marechal Duque de Caxias. The percentage of completion is 94.2% today.
We hope that we will be able to deliver the first oil Q3, as I mentioned just now. This is the golden age of FPSOs. The demand for FPSOs are strong. We expect that it will remain strong for the next 5- 10 years. Therefore, there will be a lot of opportunities for the offshore business segment, especially having completed Mero 3 project. Insofar as MHB, it is on the path to recovery. In the first quarter of this year, you can see that it is now reporting profits. In the first quarter, we can see that revenue has increased substantially year-on-year, driven by strong performance both in the heavy engineering segments' ongoing projects, as well as increase in revenue from dry docking and repair services.
Also in the heavy engineering segment, we have achieved a profit in the first quarter compared to an operating loss in the corresponding quarter. Lastly, last but not least Strategies division. Last year we incubated the division, now it is beginning to show the fruits, especially with the contracts that we signed with PETCO for the zero emission vessels. Also the contracts that we have signed with PETRONAS CCS Ventures, as well as with Mitsui O.S.K. Lines, Ltd to invest and develop the LCO2 carriers. We are very bullish about the clean energy sector going forward. You are going to see that a significant amount of renewable fuels, clean fuels are required to affect the transition, and 50% of those fuels will require maritime solutions. The opportunities for MISC as a maritime player will be abundant. Thank you. That is my opening.
I'll pass back to Faizan.
Thank you, Encik Azlan. Next, without further ado, we'll have a presentation on financial performance by Encik Afendy, followed by a market outlook by Cik Gurkiran . Encik Afendy, please.
Thank you, Faizan. [Non-English content] and very good evening, everyone. I'll be speaking about the financial performance of MISC for the quarter ending 31st March 2024. For revenue, our group revenue for the quarter is MYR 771 million, 10% higher compared to the corresponding quarter, this is very much contributed by our heavy engineering segment. However, this is offset by a lower revenue contribution from our offshore business, mainly coming from the lower revenue from Mero 3. This is in line with the tail end of the project, as mentioned by my colleague, Encik Azlan. Against the preceding quarter four 2023, our group revenue decreased by 13.7% across all business segments.
This decline was largely attributed by lower construction revenue from Mero 3, our offshore business, as well as lower earnings base from our gas asset and softer freight rates from our petroleum and products shipping segment. Profit before tax from operations. Against quarter one 2023, the group recorded 9.8% lower PBT, MYR 148 million compared to MYR 164 million. This is due to lower share of profit from joint ventures entities from gas segment, and recognition of one-off gain in contract extension from our JVs in the corresponding quarter. Against quarter four 2023, we recorded 4.5% decline in PBT from operations as a result of low freight rates in the petroleum and production segment. This is expected because of the seasonal demand. Lower construction progress on Mero 3, as mentioned earlier. Profit after tax.
We reported higher PAT by 15% compared to quarter one 2022, and 19% against quarter four 2023. Arising from the gain on disposal, as well as which happened in this quarter, and lower impairment provision in the previous quarters. Cash flow from operations for the quarter is lower by 36% against quarter one 2023, and 50% against quarter four 2023. Very much due to the timing mismatch of receipts from customers as well as payment to our vendors, especially in our heavy engineering segment. Okay. Next. In terms of our balance sheet. Our group balance sheet as at 31st March 2024 remains solid. Our total assets, equity and liabilities remain fairly unchanged as compared to December 2023. Our gross gearing ratio has not changed, and our net gearing ratio marginally higher by 0.01x. Next. On cash and debt balances.
Our cash balance remains healthy at MYR 1.6 billion as at 31st March, and when we compare against December 2023, it's reduced by 6.2% due to dividend payment that we made. Our debt balance remains constant. Performance by business segments. Our gas segment recorded a lower revenue by 11.8% against preceding quarter, and 4.7% against last quarter four 2023, primarily due to lower earnings, as I have mentioned earlier. The decline in revenue was cushioned by the gain on vessel disposal and lower impairment provision in the current quarter, resulting in a higher PBT by 23% and 4.9% respectively.
Our petroleum segment remains fairly consistent. A bit marginally lower revenue and PBT in current quarter as compared to the preceding quarter due to lower freight rates, tandem with the seasonal shift. On top of that, we achieved a gain on disposal in this current quarter. Our offshore business revenue and PBT declined due to lower construction progress on Mero 3, as mentioned earlier, and lower incremental, and one-off gain from contract extension in our JV companies. Our heavy engineering segment recorded 12.9% decline in revenue quarter-on-quarter due to incremental progress on ongoing heavy engineering project. The revenue increased by 85% against the comparative quarter of 2023 due to some projects were at the early stages last year. PBT remained constant, stable across all comparatives. That's all from me. Thank you.
Thank you, Encik Afendy . Next, to Ms. Gurkiran .
Thank you, Faizan. A very good evening to you, analysts. I'll start off with the shipping segment and the market outlook for the shipping segment. Quarter one, we saw that rates softened due to the lower demand, due season demand, as well as the inventory built up in Europe as well as Northeast Asia. However, the market remains positive. Spot rates are expected to improve despite ample vessel availability in the market. Our gas unit will remain from its portfolio of long-term charters. The LNG segment is expected to improve as we go into the next quarter. In terms of FIDs, we are looking at 2024 to be the possible year in terms of planned LNG projects. Some of the projects in the U.S., as you know, has been challenged due to the temporary pause in terms of licensing LNG projects by the government.
What we see is that under construction projects, for example, if they are slated to continue, will come online by 2028, and they will not be affected in that sense. With the U.S. taking a step back, other LNG projects or other LNG players in the Middle East, for example, and Asia will ramp up their game and expand their footprints in the market. This you see the QatarEnergy example. With regards to new building. The LNG order book at the moment stands at about 53% relative to the current fleet, which is about 364 vessels, and majority of them are LNGCs. This is an increase compared to last year, 2023. Among the new orders, majority are from QatarEnergy based on the mega LNG expansion plans of phase two.
Despite that, the tight shipyard conditions are likely to persist under 2028, the earliest slots are usually going at a high premium. Having said that, the labor shortage at South Korean yards that we see today could also have an impact in terms of delays and delivery of the new builds as well as the sanctions that we put forward onto Russian ship owners as well as shipyards. There could be delays due to external factors. On the petroleum shipping side, we see that the market is positive overall, it is favorable due to its tanker supply-demand fundamentals. The market rates have remained firm despite the increase in ton-mile demand, also by the growing long-haul Atlantic exports, the focus for us probably will be on the long-term secure income to generate business growth.
In terms of the fleet growth, the crude tanker owners are well positioned probably to enjoy attractive earnings into due to the truncated supply as well as the healthy demand. That will keep the utilization percentage strong and the rates will remain high. However, the weakness in the fleet growth, for example, will support as well the tonnage utilization and perhaps cap most of the decline in rates. The order book to fleet ratio, as you can see, is about 6.9%, and the total vessels on order book stood about 154 vessels and most of it are specification flexes. Moving on. In terms of the demolition, you can see that in 2024, the deliverables and demolitions will be low. However, this will lead to an expansion overall in the fleet.
The current situation in the Red Sea, for example, is unlikely to improve, and the ton-mile will continue to expand and hence the supply to the fleet, that will boost the vessel utilization further. Having said that, the lack of replacement in terms of tonnage also will slow down the demolition rate over the next two years, and this will probably revive in 2026 as you can see from the graph. As for the offshore side, offshore CapEx is witnessing a very strong growth, a strong trend, and it's projected to continue coming years, with the total upstream offshore CapEx estimated to reach about MYR 270 billion by the end of 2028. We'll be looking at a CAGR of 6.5% throughout to 2028. There is therefore a new renewed appetite for exploration. Asia Pac and Latin America will drive the growth.
About 51% of the E&P growth is on spending as well. Moving on to my last slide. What we can see is that there's probably going to be about eight FPSOs to be awarded this year, and most of them are from Brazil, perhaps two from the other parts of South America. There has been a significant pause in the FPSO awards in the past years. This is probably because cost reevaluation and adjustments to the new reality of financing. With that, I end my presentation. Thank you.
Thank you, Ms. Gurkiran, for your presentation. We will begin the Q&A session shortly. Just some guidelines. For participants with questions, please use the raise hand function. We 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 function again. We will now begin the question and answer session. Okay. First question is from Ben Shane. Go ahead, Ben.
Hi. Good evening. Thanks for the presentation, and well done on a good set of results. My first question is just a simple one. What would your normalized cash flow look like if not for the lumpy vendor payments? My second question is, have you made any headway in lining up a partner to monetize Mero 3? How does that affect your appetite or capacity to take on new projects? You did mention you're quite eager on the LNG pipeline. Just wondering, how does that swing your decision on how many projects you can afford to win, almost?
Can you just answer, because I spoke about the adjusted cash flow. The answer to the first question, Ben, is about $270 million. If you were to adjust for the anomaly coming out from MHB, the adjusted or the normalized cash flow will be about $270 million for the first quarter. Your second question about the progress that we're making on the Mero 3, right? That's your question, right? We are in discussions with one or two parties. It's currently in the process. Because of the size of the transaction, it takes a bit of time. On the third question, can you repeat it again, please, Ben?
How much does this affect your ability to go and bid for projects? Will you have some balance sheet constraints if you're not able to monetize Mero 3?
If you look at the past couple of years, we have been spending about MYR 1 billion- MYR 1.3 billion of CapEx per year. That would probably be the amount of CapEx that we can spend. Right? If we want to spend more, we certainly need to monetize some of our assets. We are currently working on the Mero 3 asset in terms of monetization.
Sorry, can you just clarify your first answer, $270 million. Is that right?
Yes, thereabout.
Why is it still quite low compared to your previous quarters?
MHB was not able to bill the clients during the first quarter because it had not reached the percentage of completion required for the next billing. The explanation is mainly coming from MHB, and you will remember that last year, the cash flow was unusually high because we had a one-off FSU prepayment.
Okay. Understood.
Thank you. Thank you, Ben. Next, we have a question from Muhammed Nuur Ashman from Am Investment. Go ahead, Ashman.
Thank you, Faizan. Hi, everyone. Firstly, congratulations on the good set of results. Just a few quick housekeeping questions from me. Could you reiterate back what was the term to spot ratio for the quarter?
It's 92% term for petroleum. 92% term, 8% spot.
Is that similar across the board for the other segments or only for the petroleum segment?
That is for the petroleum segment. In terms of the gas segment, it's probably about 80%+ .
All right. Secondly is, with regards to the construction progress for Mero 3. Despite having your sail away, the construction progress is at 94%, as you said. Is that construction progress or accounting progress? How do we look at that? You will only recognize the final 6% upon first oil, or how will it work?
Yeah, that is accounting progress.
I see. The final 6% will only be recognized upon first oil, yeah?
Maybe I get my finance colleague to answer that one.
Basically, from an accounting standpoint, we'll need to resolve all the small items with our client before we get to be able to recognize the final milestone. Yeah. Then only then we'll be able to achieve the 100% of the construction progress.
I see. The final 6% is one final milestone, right?
It's a.
One final milestone payment.
Set of accounting milestones up to first oil. It progresses towards the first oil. FPSO has already arrived in Brazilian waters and going towards the hookup and commissioning. That's where the rest then gets nearer to the 100%, as my colleague said, happily mentioned just now.
All right, Afendy. Okay, thank you.
Thank you, Ashman. Next, we have a question from Raymond from CGS. Go ahead, Raymond.
Hi. Good evening, everyone. Yeah, good to see you guys. The question I have is on the Mero 3 financing. I believe that currently the Mero 3 CapEx is completely funded by internal capital from MISC Berhad. One of the ways you can raise cash is to either do project financing or project bond. I believe that you have spoken about this previously. Could I just get an update on what's happening here?
I mean, the current market is on the high side, and if we were to lock in the current rates, we would have to pay very high rates, right? Currently the strategy is to work on the divestment based on the whole amount and later on do the project financing or the project bond where the market is more conducive.
I see. Okay. If you do sell down your stake, will you sell it down below 50%?
Eventually that is the goal. The goal is to deconsolidate the asset. We are working towards that.
Okay. Can I know what kind of EPCC revenues and profits were recognized for Mero 3 in the first-
Raymond, can you repeat your question, please? We don't hear you clearly.
Yeah. May I know what the EPCC revenue and profit recognition in the first quarter was for the Mero 3?
For Mero 3, the quarter one profit is MYR 50 million. Maybe we'll come back to you, Raymond, on that question. Maybe you want to proceed with for the other team revise.
Yeah. In terms of the sale of the LNG tanker and the petroleum tanker, may I know what is the identity of those vessels, please?
The LNG was the two midsize tankers. They're quite old midsize tankers.
The LNG?
Correct. Then in terms of the petroleum. What's the name?
That's one of the, what's the name? Bunga Lili, is that? Yeah, that asset that we have on bareboat chartered from the Japanese client. It's the last of that Bunga L-class chemical.
That is the, s orry, what's the name again, please?
Bunga Lili. Like Bunga Lili.
Okay.
I have-
Okay. I'll go to the back of the queue. Thank you.
Thank you, Raymond.
Oh, no, sorry. Do that.
Yeah. Raymond.
For the current quarter one, the profit for Mero 3, the construction profit Mero 3 that we have registered is about -$11 million.
Okay. $11 million , right? What's the revenue?
The revenue. One second. Yes. The construction revenue is about between MYR 70 million-MYR 80 million for the current quarter for Mero 3.
Okay. MYR 70 million- MYR 80 million, yeah. Okay. Thank you, Afendy.
Okay. Thank you. Thank you, Raymond. Next, we have Kong Ho Meng from UOB Kay Hian. Go ahead, Ho Meng.
Hi. Good evening, guys. Can you hear me?
Yeah.
Hi.
Yes.
Thank you. Thanks a lot for the briefing. Just a few questions. Firstly, you briefly mentioned about the LCO2 business that you may be doing. I think based on what is reviewed on news flow so far, an estimate of about 3 million tons per year of CO2 from Japan that PETRONAS can get. Assuming you are the only player that is doing this, how many ships would that represent? Yeah.
For that particular venture, Ho Meng, I think you're referring to our business MOL-MISC JV that we have announced. Currently, it's at the stage, evaluate the design stage of the asset itself for the size comparable to the aggregated carbon that we can collect from that locality, and also the technology for the injection of the LCO2 into the reservoirs or for other purposes, reuse purposes. That's the stage that we are in. Sometime first quarter, second quarter next year is when we will look at in terms of the commercialization and what sort of asset size and the number of assets that we would be requiring for that particular project. Globally, there are also other projects coming up, and our team is also evaluating and prospecting at the initial stages, we will have to see.
All that will be more mature in terms of visibility sometime first half next year.
I see. Okay. Basically, if there's any FID, it will only be next year for any of the LCO2 vessels.
That's right. We're looking at it, because at the end of the day, we don't want it to be an asset size, which is only fit for a certain duration of asset size and technology for a certain duration. Then it becomes a bit difficult to commercially manage those assets, one or two, one and a half decades down the road. That's the approach that we're taking.
Okay. My second question is to just briefly check on the crude tankers. I think, when I look at what your peers are disclosing and yourself, your petroleum segment, if we exclude the disposal gain, it doesn't seem to be improved. It's just a flattish performance compared to QoQ and also year-over-year basis, whereas your peers are still reporting that average rates are higher. Do you have a comment? Yes.
If it goes back to our basic fundamentals, in terms of we as an organization, as an entity for our investors, we want to ensure that we have stability of our operations. As my colleagues have said just now, a major portion of our assets are fixed on longer term, and as the market rates improve, then we do arbitraging position in terms of locking in and getting a higher, longer-term rate. Compared to some of our peers, I know that you are referring to, they take positions in terms of having more volatility and the appetite for more volatility, whereas our appetite is more incremental growth, incremental returns, and stability, financial growth. That's the philosophy and the DNA that we take.
As you know that we're very prudent in our investment in commercial decisions, what we've also seen that in terms of year-over-year, our returns on our assets have improved. Year-over-year, the returns have improved, and I'm quite pleased with those returns improvements.
Okay, got it. Just last two questions that are related, if you don't mind me asking. With all the contracts you have secured so far, moving forward, are you now in the execution mode or are you still actively bidding for more? Every semester you are seeing that you need to bid a lot of contracts because your bid book is tight. Related to this also, is there any chance that you can revise the Net Debt to EBITDA limit with the rating agencies because you are in a position of growth. My thinking is that probably this ratio can be revised as well.
Yeah. We are executing a lot of projects because we have won a few bids. Like we said just now, the SRM, the SeaRiver Maritime contracts from last year, deliveries will be over the next one to two years. The Qatar Energy also. The 15 vessels that I mentioned will be delivered over the next two or three years as well. All of those will require a lot of execution. With Mero 3 having been completed, we'll be also looking at new project. Whatever it is, we will be operating within our rating agencies gearing constraint. We take that as sacrosanct, and that is basically the cornerstone of our financial discipline. Yeah, we will not be able to compromise on that point. Based on that principle, it has served us very well.
We've got stable cash flow, growing incrementally, and basically a very safe stock.
I see.
That's why we can give you the stable dividends, right?
Is it safe to say that moving forward, your contract winning appetite, you're taking a breather already because you won quite a number of contracts. Unless you secure a project where the funding totally rely on your balance sheet, right? Yeah.
Yeah. When Mero 3 is going to start generating cash flow from the third quarter, that will also give us headroom to grow as well, right?
Oh, yeah. Okay.
Now that it's completed, we will be able to then start deploying capital against the new headroom.
Okay, got it. Okay. Thank you. That's all I have.
Thank you, Ho Meng. Next, we have Raymond. Go ahead, Raymond. Raymond Yap.
Yes. Thank you, Faizan. Just going back to the question about the Mero 3 reaching or achieving first oil in the third quarter of this year. Let's say if for some reason the final acceptance is a bit delayed, will you be getting revenues in between the first oil date and the final acceptance date?
The cash flow generation is subject to the final acceptance and first oil, which we are working very religiously to ensure successful commissioning. We hope to get it by the first quarter. The third quarter, sorry.
Okay. Of course, that works.
What I understand from speaking to other FPSO companies is that typically the firm period will only start upon the final acceptance. First oil is only one of the many steps towards reaching final acceptance. I'm just curious if final acceptance is indeed achieved in the third quarter. Sorry, if first oil is indeed achieved in the third quarter, but final acceptance is, let's say, three months after that, right? During that interim period of three months between first oil and final acceptance, will you actually be able to book some revenues?
Yeah. My understanding is that we are getting paid from first oil.
Okay. Does the firm charter period actually start from first oil or does it start from final acceptance?
We can come back to you on that specific point, Raymond. My understanding is that, Raymond, we will reach first oil in third quarter, we'll need to pull from the risers first oil to support the client. We will be paid from first oil.
Okay. Sure. Can I have management's comment on MMHE because I think it has a couple of legacy projects still on its books still being executed. In the past we have seen quite significant impairment provisions for foreseeable contract losses. Is that something that you feel is behind you?
Maybe I cover the MMHE. This was also asked to me by my, what do you call, shareholders during the AGM just last month. We have to give due respect to MMHE as another listed entity. They did have the, I'm not sure whether you've covered them. That was last week. This is our view as a shareholder. As far as the number of projects in the yard this year, the load out has been on schedule. When we look at the LOP, we find that there are improvements in the project execution. Project execution risk still remains, but the one or two lumpy project execution risks, which MHB faced last year seems to have been ironed out.
Yeah.
By large, the projects are on schedule.
A lot of focus on project execution, a lot of focus on quality, a lot of focus in terms of recovery from clients on credible claims. There's a lot of team effort going into that. Yeah. Lastly, I would say that the risk, the project execution risk, has reduced. Has the project execution risk been completely eliminated? No one can say a project execution risk is completely eliminated in any project execution, be it heavy engineering, be it offshore, be it shipping in new build. Yeah. That's where the team's strength, the capability of addressing, mitigating, and delivering to be on time, on schedule, on quality, and on cost. That's the focus.
Raymond, to your question on the firm period, I confirm that the firm period will start from first oil.
I see. Okay. Sure. Thank you very much for that. Yeah. One more question about MMHE, Captain Rajalingam. Thank you for that, because I don't cover the company. I do notice that the profit margin is extremely thin, just at 1%, what of a revenue of MYR 200 million. Is the marine repair business making losses? Is that the reason why it's eating into the heavy engineering profits?
The answer is negative. The marine repair segment is not making losses. As far as the revenue recognition, the revenue recognitions are on of the construction. We need to remind ourselves, a majority of the projects were taken. These are historical legacy projects taken on lump sum. It was during the period where the unfortunate twin events was not on the radar, right? The unfortunate COVID, subsequently, the unfortunate Russia-Ukraine has escalated supply chain costs by easily 25%-30%, as we all know from market information.
These are the ones that, what do you call, are the legacy projects. Whatever it is, we are credible in terms of delivering projects to the satisfaction of the client. Whatever credible recoveries that we can get contractually, which is contractually, and any of the VOs that we can credibly state. That is a recovery which is being taken by the heavy engineering side of MHB.
Okay. Thank you very much.
Maybe I address the Mero 3 once and for all, as I have been addressing the last two years. Yeah. This is an asset which on publicly available information, as you see from the EnP website, PB's website, where the clients audit. This is one of the best, if not the best, amongst the Mero fleets. This is publicly available information on the client's website. On arrival, within 24 hours, the provisional acceptance of the asset has been provided, two days ago. The asset is going in directly to the field for hookup and commissioning. Detailed attention is being put in by our team to ensure that by the day end of third quarter, as Raja Azlan mentioned just now, that we achieve our first oil. Because for us, it's credibility. It's credibility to say we have arrived on this scene.
Now, in terms of equity for this asset, a large exercise was done to look at equity investors for this asset. There are shortlisted investors that we're looking at. As mentioned by my colleagues just now, it is a large tranche, so we need to be very careful in terms of moving it. Yeah. As an organization, we have been able to deploy our cash to the asset and then ride out instead of going in and taking debt financing when the interest rate regimen is actually quite high. All right? As all of us here know, we are looking forward to the interest rate environment becoming more palatable before everyone goes in and does this debt financing. We are being careful, cautious, and at the same time being credible in terms of doing this.
As far as new CapEx are concerned, year- to- date, we have already done. We have been given FID for three LNG vessels by QatarEnergy. Two with our colleagues within the PETRONAS group on-market. This is leading in terms of two dual-fuel ammonia Aframaxes. First in the world for this sort of asset classes. That itself will give you a parameter in terms of how much new FIDs, which has already been done. As an organization, we will always be prospecting and seeing what best that we can do amongst the four businesses that we have, plus the emerging business in our new. We will never never bridge our financial headroom as far as our ratings are concerned to maintain that. According to our risk assessment, decision-making parameters and also project risk assessment. What brings in, plus the ESG component coming in.
We have our internal carbon pricing matrix to look at which are the prioritization as far as our asset classes are concerned, all in line with our published MISC 2030 aspirations. It's always in that manner, do it in that manner, rather than wanting to get too excited in one area and then find ourselves being in the wrong side of the quadrant. That's as far as Mero 3 and our investment CapEx is concerned. Of course, as management, we will have to look at all possible levers in order to grow, our growth will be credible, sustainable, in line with our MISC 2030 aspirations, and provide value for our shareholders and stakeholders.
Thank you. Thank you, guys. I think we have some time for one or two more questions. Next, we have a question from Ben Shane. Go ahead, Ben.
Hello, sir. I have to ask about dividends. It's up to MYR 0.08. I know your dividend cadence has changed a little bit. It was previously MYR 0.07, MYR 0.07, MYR 0.07, MYR 0.12, and MYR 0.07, MYR 0.10, MYR 0.07, MYR 0.12. This year it stepped up to MYR 0.08. You do say that you want to maintain a stable dividend to the market. What should the market expect for the second quarter? Should we expect MYR 0.10, or are you sort of spreading that out, maybe MYR 0.08, MYR 0.08, MYR 0.08, MYR 0.12? How should we think about it?
I thought that you'd be happy to have MYR 0.08 instead of MYR 0.07, but okay, l et's take it to question. As my colleagues mentioned just now, playing with our payout ratios, right? That's what we look at. With the stability, as you know, we do not have a dividend policy. Neither will we give back market leading sort of information. Historically, that's where we are. Last year, we were total MYR 0.36 against previous year of MYR 0.30. We will always do our best for our shareholders. As the organization remains very stable, solid, incremental. We will try to do our level best for our shareholders while maintaining financial discipline and also apportionment for our investment CapEx to move forward, sir. That's a roundabout answer, Ben.
Oh, thank you. Thank you, sir.
No more questions.
No more. All right.
Thank you, Raja. Thank you, Ben. I guess that will be our final question for today. Before we conclude today's conference call, today's meeting, on behalf of MISC Berhad, we thank you for your participation. The PDF version of our presentation slides has been sent to attendees of today's call. It will be made available on our corporate website. To the sell-side analysts, appreciate if you could forward a copy of your published research report to the IR team, MISC IR team for our reference. Thank you once again, everyone. Stay safe and have a good evening.
Thank you. Thanks, everyone. Take care and have a good day.