MISC Bhd (MISC) and Bumi Armada Bhd (BAB) had mutually agreed not to proceed with their proposed merger, as the memorandum of understanding (MoU) between the two groups are set to lapse on 14 August 2025.
“We noted that MISC will retain full control of its offshore business strategy and pursue its growth plans without the complexity of an all-share transaction,” said MBSB Research.
This spared the group from potential shareholder dilution and integration costs due to the large-scale merger. As for BAB, this change allows the group to continue its independency on top of its strong order book.
While the termination of talks provides clarity, uncertainties remain on the direction of these companies. We expect that there could be some short-term market speculation upon reassessing the long-term growth for MISC and BAB in their FPSOs business without the merger.
MISC may be missing a growth opportunity, while BAB might lose synergy and access to extensive resources for their fleet.
External risks should still be considered, including:
(i) Oil prices volatility,
(ii) Supply chain issues,
(iii) Geopolitical risks,
(iv) Operational risks,
(v) advancing technologies.
We believe that, while the groups are likely to mitigate such challenges in accordance to their own business models and strategies, these risks will be crucial factors in determining the companies’ trajectories moving forward.
Nevertheless, we are looking into the bright side on this termination. For both MISC and BAB, we believe the potential merger may not be aligning to each other’s long-term strategic objectives and will now focus on their own growth opportunities.
Market may speculate on the future of these companies’ fleet management, but we believe that MISC will continue to leverage on its tanker fleet and pursue sustainability solutions for its ships, while BAB will remain vigilant for other growth opportunities for its FPSOs and offshore E&P projects.
Pending further updates on this termination as well as the upcoming earnings results, we maintain our BUY call for both MISC and BAB with maintained target prices of RM8.13 and RM0.70 respectively. —Aug 5, 2025
Main image: Wong Engineering Corporation
