U.S. Markets open in 3 hrs 23 mins

Edited Transcript of MISC.KL earnings conference call or presentation 13-Nov-19 10:59am GMT

Q3 2019 MISC Bhd Earnings Call

Kuala Lumpur Nov 25, 2019 (Thomson StreetEvents) -- Edited Transcript of MISC Bhd earnings conference call or presentation Wednesday, November 13, 2019 at 10:59:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance

* Rozainah Binti Awang

MISC Berhad - General Manager of CPD

* Vincent Ng

MISC Berhad - General Manager of CPD

================================================================================

Conference Call Participants

================================================================================

* Adam Rahim Mohamed

MIDF Amanah Investment Bank Berhad, Research Division - Research Analyst

* Anshool Singhi

JP Morgan Chase & Co, Research Division - Research Analyst

* Ben Shane Lim

Macquarie Research - Research Analyst

* Ho Meng Kong

UOB Kay Hian Research Pte Ltd - Senior Analyst

* Khir Peng Goh

AmBank Group Research - Research Analyst

* Kok Hoe Yap

CIMB Research - Regional Head of Transportation

* Yen Ling Lee

Maybank Kim Eng Holdings Limited, Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, welcome to MISC's Third Quarter Financial Year 2019 Analyst Briefing Conference Call. Rozainah from MISC Investor Relations team will run through the agenda for today's briefing. Rozainah, over to you.

--------------------------------------------------------------------------------

Rozainah Binti Awang, MISC Berhad - General Manager of CPD [2]

--------------------------------------------------------------------------------

Thank you, Hadi. A very good evening, ladies and gentlemen. Thank you for participating in our third quarter financial year 2019 analyst briefing. We have with us today Mr. Raja Azlan Shah Raja Azwa, VP, Finance; Eslin Halimi, Head, Financial Reporting, Governance and Budget Finance; Mr. Emran Othman, VP, Corporate Planning; Mr. Vincent Ng, General Manager, Corporate Planning; and (inaudible), General Manager, Corporate Planning.

We will now start the session with financial highlights for the quarter's performance, which will be presented by Eslin, followed by market outlook and business update by Mr. Vincent.

At the end of the presentation, we will open the line for a Q&A session. Our event manager will later provide instructions on the Q&A process.

Before we start, I would like to bring to your attention to the disclaimer slide. During the presentation, we may make some forward-looking statements in reference to our plans and expectations, and actual results could differ due to unknown risks, uncertainties and other factors that are, in many cases, beyond MISC's control.

With that, I pass the session to Eslin for our first agenda, the update on MISC's third quarter financial year 2019 financial performance. Eslin, over to you.

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [3]

--------------------------------------------------------------------------------

Good evening. Thank you, Rozainah. Thank you to the participants for joining MISC Berhad's Quarter 3 financial year-end 2019 Analyst Briefing.

Bringing your attention to Page 3 of our AB pack. Lower revenue for the quarter, mainly due to the lower TCE rates for Aframaxes in the Petroleum segment as well as lower revenue from heavy engineering due to lower number of drydocking works for [MHP]. Whereas lower profit before tax from operations during the quarter mainly due to lower revenue, as mentioned above, as well as in previous corresponding quarter, there was a one-off gain due to FSO (sic) [FPSO] Ruby II contract expansion.

For the nonrecurring items during the quarter, there was an impairment/loss on disposals of 7 A Class vessels which you may refer to our Bursa announcement for further information.

Moving on to Page 4 of our AB pack. In terms of revenue -- lower revenue coming from Petroleum due to lower earning days as a result of vessels redelivery as well as disposal of petroleum vessels since quarter 4 FY 2018. Lower revenue in current quarter also arising from onetime reimbursement for FSO Mekar Bergading towing and installation works in quarter 3 FY 2018. Despite lower revenue above profit from operations, recorded an increase mainly from Petroleum segment due to higher-margin on TCE and lower vessel ship operating costs.

Now on Page 5 of our AB pack. Cash flow from operations. Despite our volatility in our profit, cash flow from operations continuously recorded stable level comparing between corresponding and preceding quarters mainly due to commencement of FSO Mekar Bergading in quarter 3 FY 2018, higher margins from AET as well as 2 additional LNG carriers at the beginning of this year.

We always refer back to cash flow from operations because profit from operations comprise of one-off items, which are normally distorting the numbers.

On Page 6, our debt balance is hovering around USD 3.5 billion since March 2019. This is mainly due to quarterly repayment and drawdown for the project, which is in the pipeline.

Now we're moving on to financial performance by business segment. On Page 7, revenue and profit before tax were quite stable between the comparative quarters. The variation in the revenue and profit before tax mainly came from the drydocking, which came into those quarters.

On Page 8, revenue remained stable since preceding quarter for Petroleum shipping. However, lower revenue recorded as compared to corresponding quarter mainly due to lower earning days as a result of lower number of operating factors. However, narrowed losses for Petroleum segment as compared to corresponding quarter due to higher blended TCE rates and lower ship operating costs as a result of lower number of vessels, as mentioned above. However, the above was offset by an impairment/loss and disposal of 7 A Class vessels in the current quarter.

On Page 9, Offshore Business, similarly for OBU, revenue and profit before tax as compared to preceding quarter are fairly stable. However, lower revenue recorded as compared to corresponding quarter, mainly due to FSO Mekar Bergading onetime reimbursement on towing and installation work. In addition, profit before tax was lower as compared to corresponding quarter, mainly due to gain on acquisition of business as mentioned in the Bursa announcement.

Finally, in the last segment, on Page 10, Heavy Engineering, lower revenue recorded for both corresponding and preceding quarters, mainly due to lower number of drydocking works. However, Heavy Engineering segment recorded narrow losses for profit before tax as compared to corresponding quarter, mainly due to the finalization of projects.

I will now pass to Vincent for market environment and business updates. Thank you.

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [4]

--------------------------------------------------------------------------------

Thanks, Eslin. Good evening to all the participants on the call. Thanks for joining us again. I'll start first with the LNG Shipping segment. As you can see from the chart, the gray line, since the last quarter, there has been upturn in the spot market rates for LNG carriers. It has increased something like 32% quarter-on-quarter to about $64,000 a day. This marks the beginning of the annual peak season going into autumn and winter. In fact, in October, spot rates have risen even further above $100 a day. So overall, the market sentiment has been good and with rising demand. We noted that during the quarter, Cameron LNG, Corpus Christi, Train 2 and Freeport LNG from the U.S., all started commercial operations. In October, further Tango FLNG and Elba Island LNG also commenced operations. So this would have driven additional demand for LNG carriers.

Moving to the following slide, Page 13. This shows the order book for LNG carriers. There's not much change since the last quarter. The newbuilding orders remained firm with 138 vessels to be delivered between 2019 and 2022. This is 5 higher than what we reported last quarter. So we expect that there will be continued firm orders for vessels in view of the increased demand for LNG coming from more liquefaction projects going ahead.

Moving on to the Petroleum segment in the next slide. We have seen that VLCC rates have surged towards the end of the third quarter, although the Suezmax and Aframax segments were relatively flat. This was up to September. And as many of you would know, in October, there was a major spike in spot rates for all the 3 segments with VLCC spot rate surging to an average about $140,000 a day. Suezmax rates exceeded $100 -- $100,000 a day and Aframax have reached $53,000 a day on average. This was contributed by a number of geopolitical events on top of industry factors. The geopolitical factors included the attacks on the tankers and the drone attacks on Saudi Arabia oil facilities in the Middle East, a series of sanctions from Iran, Venezuela and also on Costco subsidiaries. And the reported banning of some vessels by certain charterers.

As for the industry factors, there was an increase in demand from winter season fundamentals as well as refineries ramping up production ahead of IMO 2020. On the other hand, supply has been [crimped] by vessels being taken off the market for scrubber retrofits and also to be used as a floating storage for low sulfur fuel.

Although charter rates have come up a high since October, we are optimistic that the segment would remain robust in quarter 4 and end the year on a firmer note compared to last year.

Just to complete on the Petroleum segment. Just looking at the pipeline for newbuild orders as well as demolition. You can see that in 2019, there were strong deliveries of vessels, coupled with low demolitions. As a result there is a growth in the fleet in 2019, however, this will be tapering off in 2020 and '21, as you can see from the slide. We also noted that scrapping activity this year has been very low. This is likely because of the very strong freight rates that have caused owners to delay scrapping of their old vessels.

Moving on to the Offshore segment. Again, the chart will look pretty similar to the one we portrayed last quarter. Although expectations of oil prices have moderated somewhat, it's still within the range that is supportive of activities in the oil and gas upstream sector. So we expect that the awards of floating production systems will be healthy going forward. In 2019, we noted that -- we expect that could be up to [13] FPSO awards for 2019. As of today, 8 have been awarded, 4 in Brazil, and in fact, 4 have been awarded in October alone.

Going to the next slide, Page 17. This shows the location of various potential projects for 2020. Again, note that Brazil has the highest number of [last year] FPSO awards expected for next year [at 4]. Altogether, we expect something like 24 floating asset awards in 2020 of various (inaudible).

That concludes the market update. I would now go to the business update.

In the third quarter, we had very good news from our LNG segment. They have successfully secured 3 different projects. The first one was for 2 LNG carriers that they are co-owning with Mitsubishi Corporation and NYK, and this is to serve Diamond Gas International's carrier requirements for the U.S. segment and also worldwide. Now this is for time charter contracts.

Secondly, they also won a time charter for a LNG Bunker vessel of PETRONAS, which is for a 3-year contract in collaboration with Avenir Ltd.

Finally, we also announced the securing of 2 time charter contracts with SeaRiver Maritime with Exxon Mobil. This is for charter of 2 vessels for a firm period of 15 years.

So these additional vessels will add to existing fleet of LNG carriers of 29 carriers plus 2 FSUs, but obviously, as you know, are on long-term charters.

As for the Petroleum & Chemical business, we recorded a portfolio mix of 60:40 term to spot. This -- you will remember that last quarter, it was 65:35. So that [movement] to spot market should be beneficial to us given the higher spot rate that we are enjoying going forward.

We have also entered into an agreement to sell 7 A Class vessels, as previously mentioned by Eslin. So one of the vessels [has been delivered] in the third quarter and the remainder of the vessels to be delivered progressively from now to the first quarter of next year.

We also have recently had a naming ceremony for 2 of the world's first Dual-Fuel Dynamic Positioning Shuttle Tankers in Korea, but these are for our client Equinor. And one of the vessel will be delivered by the end of this year, and another one will be in the first quarter of next year.

In all, if you -- to recap, we have [7]: 1 to be delivered this year and the remaining 6 next year. Again this will be part of our strategy for -- to secure long-term charters for our petroleum fleet and reduce our exposure to the cyclical market.

Then on the next page, on Offshore business. We continue to explore opportunities for FPSOs, FSOs and MOMPLs in Asia Pacific as well as the Atlantic Basin. We are pursuing both organic and inorganic growth [opportunities]. In terms of some of the legal cases, for Gumusut Kakap arbitration, there is no development during the quarter. So the decision is expected to be delivered in 2020.

In terms of the PCPP MOMPL we have -- for the arbitration, MOMPL continues to pursue proceedings. In respect of the adjudication for the $9.9 million claim, which was awarded to MOMPL and which PCPP has planned to set aside, MOMPL is contesting this application.

For the second adjudication decision, which was delivered on 7 October, MOMPL was successfully awarded this entire claim of $4.7 million. And MOMPL is in the midst of registering the second adjudication in the High Court for enforcement. As for proceedings in court. There is no change in status for the first item, which is originating summons in relation to the USD 42 million case.

As for the writ action against the shareholders of PCPP. (inaudible) filed for to strike out of the proceedings and PCPP has filed to stay the proceedings. Both applications were allowed by the High Court. MOMPL has appealed to the high -- Court of Appeal against both decisions. Recently, the Court of Appeal has upheld the High Court decision to strike out MOMPL's case while the appeal against PCPP's stay application will be heard in February 2020.

That's it for Offshore and moving on to the final segment, which is Heavy Engineering. During the quarter, we recorded a sailaway of Tembikai Non-Associated Gas development and the marine repair completed the repair and maintenance of 59 vessels and also secured 72 jobs, which is an improvement over the third quarter. The order book backlog as of September is MYR 2.7 billion. While the tender book is approximately MYR 13.7 billion.

As you know, we will continue to pursue existing business of Heavy Engineering, looking at floaters conversion opportunities and expanding the marine capacity through the new dry dock 3. In the meantime, we are also looking at new business opportunities, namely modular fabrications and also working on the in-house processes and partnerships to promote competitive price offerings.

That's it for me. I'll pass you back to Rozainah.

--------------------------------------------------------------------------------

Rozainah Binti Awang, MISC Berhad - General Manager of CPD [5]

--------------------------------------------------------------------------------

Thank you, Eslin, and Vincent, for the presentation on financial performance and business updates. With the completion of the presentation, I would now like to hand over the call to the event manager, who will guide and manage the Q&A session. Pak Hadi, over to you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question Kok Hoe Yap from CIMB.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [2]

--------------------------------------------------------------------------------

This is Raymond here from CIMB. Could I ask about the Petroleum Tanker division? Because if I look at the Aframax, Suezmax, and VLCC rates, the third quarter of 2019 versus third quarter of 2018, so year-on-year, the TCE rates actually went up. So why did the Petroleum shipping losses go up? So if you look at Slide #8, so the loss before tax on Petroleum shipping was $20.5 million year-on-year. The year before, it was minus $18 million. So I'm just a bit perplexed, why did the loss go up when the TCE rates actually went up?

--------------------------------------------------------------------------------

Unidentified Company Representative, [3]

--------------------------------------------------------------------------------

Raymond, basically, there was an impairment charge following the disposal of the A Class...

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [4]

--------------------------------------------------------------------------------

The impairment of $13.4 million, right, that's already excluded.

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [5]

--------------------------------------------------------------------------------

$20.5 million that you see there is after taking out the $13.4 million. Right?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [6]

--------------------------------------------------------------------------------

It is included.

--------------------------------------------------------------------------------

Unidentified Company Representative, [7]

--------------------------------------------------------------------------------

It is included?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [8]

--------------------------------------------------------------------------------

Yes. This is PBT.

--------------------------------------------------------------------------------

Unidentified Company Representative, [9]

--------------------------------------------------------------------------------

Yes, this -- the $20.5 million includes the impairment loss.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [10]

--------------------------------------------------------------------------------

It includes the impairment loss, okay. Is this the way that you consistently announce your -- make your disclosures every quarter because I think in the previous quarters, that light blue column actually does not include the nonrecurring items?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [11]

--------------------------------------------------------------------------------

Posted, I know it's after nonrecurring -- it's consistent with previous quarters, yes.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [12]

--------------------------------------------------------------------------------

Okay. So could I just confirm then, so the $20.5 million loss includes the $13.4 million impairment. So basically, the overall loss was $7.2 million only?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [13]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [14]

--------------------------------------------------------------------------------

Okay. So out of that, $7.2 million, may I know how much of that $7.2 million loss relates to the operations, automation of the 7 A Class vessels?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [15]

--------------------------------------------------------------------------------

Can you repeat the question? Relates to?

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [16]

--------------------------------------------------------------------------------

How much of that $20.5 million -- how much of that $7.2 million [core] loss at the Petroleum division includes the cost of operating and running the 7 A Class vessels?

--------------------------------------------------------------------------------

Unidentified Company Representative, [17]

--------------------------------------------------------------------------------

I think there's about $7 million to $8 million of operational loss for the overall product sector.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [18]

--------------------------------------------------------------------------------

How much again, please?

--------------------------------------------------------------------------------

Unidentified Company Representative, [19]

--------------------------------------------------------------------------------

About $7 million to $8 million of loss. Excluding the impairment.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [20]

--------------------------------------------------------------------------------

Could you tell me how much of it relates to that 7 A Class vessels? Because if that's leaving the system, then we'd like to know how much your operations will improve without the 7 vessels?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [21]

--------------------------------------------------------------------------------

Maybe I'll answer it differently. I think -- because if you notice 7 vessels, only 1 has been delivered, so there are 6 more to go, right? What I can tell you is we estimated that the [uplifted] profit after the completion of the disposal of all the 7 A Class vessels will be approximately USD 5 million. Yes, but I think I addressed this (inaudible) purpose of asking that question. But because we are in the midst of doing the transaction, so not all the vessels have been delivered yet. So what we have [accumulated] is when all the vessels are delivered, then there will be net improvement on the annual profit by about $5 million compared to now.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [22]

--------------------------------------------------------------------------------

Okay. And how many will be delivered by December and how many by March next year?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [23]

--------------------------------------------------------------------------------

I'm not able to disclose -- I don't have that here right now. But it basically between fourth quarter and first quarter.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [24]

--------------------------------------------------------------------------------

Okay, sure. Okay. The other question I have is on the Offshore side. If I look at the Offshore -- so if I look at the Bursa announcement on the first page, you have a share of profit of joint venture, and this quarter was MYR 82.4 million. And last year, third quarter was MYR 39.8 million. Could I just understand why the comparative figure last year was so low? Was there any particular reason, any particular charge or anything that caused it to be so much lower than this year's third quarter?

--------------------------------------------------------------------------------

Unidentified Company Representative, [25]

--------------------------------------------------------------------------------

In Espirito Santo, right? Yes, so the movement is basically because of the -- the write back of a provision relating to our Brazilian joint venture. This amounted to about MYR 45 million.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [26]

--------------------------------------------------------------------------------

But this was done in last year's third quarter?

--------------------------------------------------------------------------------

Unidentified Company Representative, [27]

--------------------------------------------------------------------------------

No, this is done in this quarter.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [28]

--------------------------------------------------------------------------------

This quarter, okay. $45 million write back of what again?

--------------------------------------------------------------------------------

Unidentified Company Representative, [29]

--------------------------------------------------------------------------------

This relates to a provision that was -- is related the previous year's [cost] provided.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [30]

--------------------------------------------------------------------------------

In relation to which FPSO?

--------------------------------------------------------------------------------

Unidentified Company Representative, [31]

--------------------------------------------------------------------------------

Espirito Santo, (inaudible) mentioned.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [32]

--------------------------------------------------------------------------------

Oh, so, what was the reason for the provision in the first place?

--------------------------------------------------------------------------------

Unidentified Company Representative, [33]

--------------------------------------------------------------------------------

Yes, it was relating to repair and maintenance.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [34]

--------------------------------------------------------------------------------

Okay. So you made a provision in 2018 and you wrote it back in 2019?

--------------------------------------------------------------------------------

Unidentified Company Representative, [35]

--------------------------------------------------------------------------------

That's right.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [36]

--------------------------------------------------------------------------------

Okay. Which quarter in 2018, did you make that provision?

--------------------------------------------------------------------------------

Unidentified Company Representative, [37]

--------------------------------------------------------------------------------

No, it's a progressive provision throughout the year.

--------------------------------------------------------------------------------

Kok Hoe Yap, CIMB Research - Regional Head of Transportation [38]

--------------------------------------------------------------------------------

Progressive provision over 2018?

--------------------------------------------------------------------------------

Unidentified Company Representative, [39]

--------------------------------------------------------------------------------

That's right. That's right.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

Our next question, Alex Goh from AmResearch.

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [41]

--------------------------------------------------------------------------------

3 questions. One is regarding LNG vessel. I've indicated...

--------------------------------------------------------------------------------

Rozainah Binti Awang, MISC Berhad - General Manager of CPD [42]

--------------------------------------------------------------------------------

Alex, can you speak up a bit, we can't hear you.

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [43]

--------------------------------------------------------------------------------

Okay. I have 3 questions. One is related to the LNG segment on Page 7. I think you mentioned the reason why the drop for the PBT, if you look in terms of -- compared to the second quarter, was due to vessel drydocking. Could you tell us which vessels were dry-docked? And yes -- and going into the fourth quarter, how many vessels are going to be dry-docked, right?

The second question is regarding your Petroleum segment. You mentioned that the lower -- well, the losses that you incurred in this third quarter on Page 8, is due to lower number of operating vessels. If you were to compare it with the second quarter of this year. Could you just show us -- tell us how many -- in terms of percentage of working days or the number of vessels how much was the reduction because we just want to give -- gauge on the impact on the higher rates here, okay?

And the third question is regarding your -- the [vessel] charter rates. Yes, I've noticed that the VLCC rates have gone up much higher and faster than the Suezmax and Aframax. Could you tell us exactly why that is so? Was that because of the shortage of the vessels for the VLCCs? Or was there some other reasons behind that?

--------------------------------------------------------------------------------

Unidentified Company Representative, [44]

--------------------------------------------------------------------------------

Sorry, Alex. Can you repeat the second question, Alex?

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [45]

--------------------------------------------------------------------------------

On the Petroleum segment. You've indicated there were lower number of operating vessels, which contributed to the higher losses in this third quarter. If I were to compare it with the second quarter of this year. Could you give us a bit of gauge what was the decline in the lower earnings days? And could you also quantify in terms of the number of vessels that was not in operation in that period?

--------------------------------------------------------------------------------

Unidentified Company Representative, [46]

--------------------------------------------------------------------------------

Okay. So the first question relates to the dry docking, right?

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [47]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Unidentified Company Representative, [48]

--------------------------------------------------------------------------------

You're asking how many vessels were in dry docking in the third quarter, right? That was your first question?

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [49]

--------------------------------------------------------------------------------

Yes, correct.

--------------------------------------------------------------------------------

Unidentified Company Representative, [50]

--------------------------------------------------------------------------------

So we have 4 vessels. These are 3, (inaudible), 3 (inaudible), and 3 (inaudible) and 3 (inaudible).

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [51]

--------------------------------------------------------------------------------

And the fourth quarter, how many do you expect to be dry dock?

--------------------------------------------------------------------------------

Unidentified Company Representative, [52]

--------------------------------------------------------------------------------

We don't have the information with us at the moment.

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [53]

--------------------------------------------------------------------------------

Okay. If you -- if I am compare this third quarter with the second quarter, how many of the vessels were dry-docked in the second quarter?

--------------------------------------------------------------------------------

Unidentified Company Representative, [54]

--------------------------------------------------------------------------------

There were 3 vessels dry-docked in the second quarter.

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [55]

--------------------------------------------------------------------------------

And the third quarter of last year, how many vessels were dry-docked?

--------------------------------------------------------------------------------

Unidentified Company Representative, [56]

--------------------------------------------------------------------------------

Four vessels.

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [57]

--------------------------------------------------------------------------------

Okay. All right. Yes. Okay. Great. And the second question?

--------------------------------------------------------------------------------

Unidentified Company Representative, [58]

--------------------------------------------------------------------------------

Can you -- my apologies, could you repeat the second question, again? It's something about petroleum?

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [59]

--------------------------------------------------------------------------------

Yes. Yes. The petroleum ship -- the petroleum tanker division on Page 8, right, one of the -- the reasons you've given is that there were lower earnings days, right? Could you quantify the percentage of those low earning days? And would you also give a bit of guidance in terms of how many vessels were not in operation during this third quarter?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [60]

--------------------------------------------------------------------------------

If I may, the lower earning days is actually comparison for corresponding quarters, not preceding.

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [61]

--------------------------------------------------------------------------------

Could you give us a bit of -- quantify the drop in terms of earning days?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [62]

--------------------------------------------------------------------------------

Earning days is around 700 days.

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [63]

--------------------------------------------------------------------------------

700 days in this third quarter and third quarter of last year?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [64]

--------------------------------------------------------------------------------

The corresponding quarters, not on preceding. We are talking about corresponding you know.

--------------------------------------------------------------------------------

Unidentified Company Representative, [65]

--------------------------------------------------------------------------------

Okay. I think maybe what -- we don't have the information about the comparison of earning days. But in the -- I think in the third or the fourth quarter last year, there was a disposal of 7 Aframax vessels. So as a result, the total profit and revenue has come down. In addition to that, if you look at the second quarter versus the third quarter, there was a decline in the blended charter rates for Afra.

--------------------------------------------------------------------------------

Khir Peng Goh, AmBank Group Research - Research Analyst [66]

--------------------------------------------------------------------------------

I'm trying to understand, last year, you disposed of 7 vessels. And this year, you're also going to dispose another 7 vessels. Am I right here?

--------------------------------------------------------------------------------

Unidentified Company Representative, [67]

--------------------------------------------------------------------------------

Yes. Sorry, we're talking about -- yes, last year, we disposed of 7 Aframax vessels, okay? So then in this quarter, we have signed up to dispose of 7 chemical vessels, of which 1 has completed in this quarter and another 6 will be completed over the next 2 quarters.

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [68]

--------------------------------------------------------------------------------

So essentially, the fleet size is reducing, so that will reduce the lower earning days.

To answer your third question. I think you're talking about the VLCC rates going up quite considerably. I think that happened mostly -- of course, it happened in September, but the bulk of it, the huge rise actually came in October. So I think the main reasons were due to the COSCO sanctions as well as the news about the Chinese reported that certain charters (inaudible) were not picking up certain vessels that had gone to Venezuela in the last 12 months. So a lot of these vessels are actually in the VLCC category. Also, some of the vessels were taken out for scrubber installation. And again, most of the scrubber installations have been carried out on VLCCs. So that explain why VLCC rate would have risen faster than the other categories.

--------------------------------------------------------------------------------

Operator [69]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question in queue, Kong Ho Meng from UOB Kay Hian.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [70]

--------------------------------------------------------------------------------

Can you hear me?

--------------------------------------------------------------------------------

Rozainah Binti Awang, MISC Berhad - General Manager of CPD [71]

--------------------------------------------------------------------------------

Yes. Can you speak a bit louder?

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [72]

--------------------------------------------------------------------------------

Yes. Okay. I just -- I was a bit confused with the earlier question on the write-back of provisions in your offshore segment is about USD 45 million, if I'm not mistaken. Is that correct?

--------------------------------------------------------------------------------

Unidentified Company Representative, [73]

--------------------------------------------------------------------------------

That's right. That's right.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [74]

--------------------------------------------------------------------------------

So that is equal to...

--------------------------------------------------------------------------------

Unidentified Company Representative, [75]

--------------------------------------------------------------------------------

MYR 45 million.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [76]

--------------------------------------------------------------------------------

Ringgit, okay, in ringgit terms. And it's all incurred in the third quarter, right?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [77]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Unidentified Company Representative, [78]

--------------------------------------------------------------------------------

Yes. Yes.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [79]

--------------------------------------------------------------------------------

So it's supposed to -- is it supposed to be a positive number because it's a write-back? But yet, you're -- but why is your offshore profit lower than your previous quarter even despite that write-back?

--------------------------------------------------------------------------------

Unidentified Company Representative, [80]

--------------------------------------------------------------------------------

You're referring to Slide #9, is that right?

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [81]

--------------------------------------------------------------------------------

Yes, correct. Yes.

--------------------------------------------------------------------------------

Unidentified Company Representative, [82]

--------------------------------------------------------------------------------

Yes. Because you see, we made certain provisions as well in our offshore business. There was...

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [83]

--------------------------------------------------------------------------------

Okay. So the amount provision, is it [except for] the Brazil one?

--------------------------------------------------------------------------------

Unidentified Company Representative, [84]

--------------------------------------------------------------------------------

There were some provisions for some assets, which are going to be demobilized now.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [85]

--------------------------------------------------------------------------------

I see. What are the -- what is the amount of the provisions in total?

--------------------------------------------------------------------------------

Unidentified Company Representative, [86]

--------------------------------------------------------------------------------

There was about USD 5 million for one of the FSOs.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [87]

--------------------------------------------------------------------------------

The FSO Cendor, is it?

--------------------------------------------------------------------------------

Unidentified Company Representative, [88]

--------------------------------------------------------------------------------

No, no, no, no. Another FSO, FSO [MB]. This has been disclosed in the [record].

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [89]

--------------------------------------------------------------------------------

Okay. So that's -- the total number of provision in the third quarter [except for] the Brazilian one is USD 5 million.

--------------------------------------------------------------------------------

Unidentified Company Representative, [90]

--------------------------------------------------------------------------------

Yes. And on top of that -- in the second quarter, there was also a one-off gain pursuant to the contract extension for FPSO Ruby. That was USD 10.4 million.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [91]

--------------------------------------------------------------------------------

Yes. Okay. So just to double-check in your Bursa side, you mentioned there is recognition of demobilization costs in the current quarter. That relates to the Brazilian one, right?

--------------------------------------------------------------------------------

Unidentified Company Representative, [92]

--------------------------------------------------------------------------------

No, no. That relates to FSO Angsi.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [93]

--------------------------------------------------------------------------------

For Angsi, the USD 5 million.

--------------------------------------------------------------------------------

Unidentified Company Representative, [94]

--------------------------------------------------------------------------------

What I just mentioned just now.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [95]

--------------------------------------------------------------------------------

So that is the USD 5 million.

--------------------------------------------------------------------------------

Operator [96]

--------------------------------------------------------------------------------

Our next question, Anshool from JPMorgan.

--------------------------------------------------------------------------------

Anshool Singhi, JP Morgan Chase & Co, Research Division - Research Analyst [97]

--------------------------------------------------------------------------------

I'm Anshool from JPMorgan. I had a couple of questions. Could you provide us with the mix for term versus spot for your individual VLCC, Aframax and Suezmax?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [98]

--------------------------------------------------------------------------------

Okay. You want the mix in terms of spot for VLCC and...

--------------------------------------------------------------------------------

Anshool Singhi, JP Morgan Chase & Co, Research Division - Research Analyst [99]

--------------------------------------------------------------------------------

VLCC, Aframax, Suezmax.

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [100]

--------------------------------------------------------------------------------

For quarter 3, VLCC was 86%, Aframax was 54% and Suezmax was 7%.

--------------------------------------------------------------------------------

Anshool Singhi, JP Morgan Chase & Co, Research Division - Research Analyst [101]

--------------------------------------------------------------------------------

Okay. Okay. And so what is your schedule for the retrofitting for your vessels into Q4 '19 and then into 1Q '20 as well, scrubbers?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [102]

--------------------------------------------------------------------------------

This is what, you're talking about is scrubber?

--------------------------------------------------------------------------------

Anshool Singhi, JP Morgan Chase & Co, Research Division - Research Analyst [103]

--------------------------------------------------------------------------------

Yes. For vessels, petroleum tankers, scrubbers, yes.

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [104]

--------------------------------------------------------------------------------

Okay. We have 1 vessel that was undergoing retrofit. I think by now, it may have completed. Another 3 more, the charters have actually requested for the retrofitting to be delayed. I guess for the same reason that everybody else is delaying it, which is actually to take advantage of the high freight rates currently in the market. So the plan is that originally was the 3 vessels were supposed to be completed, retrofit in by December, but it looks like it will be postponed. We don't have a firm date of when it will be done. But in any case, those vessels can operate on low sulfur fuel.

--------------------------------------------------------------------------------

Anshool Singhi, JP Morgan Chase & Co, Research Division - Research Analyst [105]

--------------------------------------------------------------------------------

Okay. I understand. I had another question. The MYR 50 million impairment, which is related to the 7 A Class vessels. Is this for all the vessels or only for the 1 vessel sold or disposed this quarter?

--------------------------------------------------------------------------------

Unidentified Company Representative, [106]

--------------------------------------------------------------------------------

For all the 7 vessels.

--------------------------------------------------------------------------------

Anshool Singhi, JP Morgan Chase & Co, Research Division - Research Analyst [107]

--------------------------------------------------------------------------------

For all, so this is just a one-off then for this quarter and nothing in this -- fourth quarter?

--------------------------------------------------------------------------------

Unidentified Company Representative, [108]

--------------------------------------------------------------------------------

That's right.

--------------------------------------------------------------------------------

Anshool Singhi, JP Morgan Chase & Co, Research Division - Research Analyst [109]

--------------------------------------------------------------------------------

Yes. And my final question is, have you faced any impact from the Venezuela sanctions by other charterers related to vessels which have been to Venezuela in the past 12 months?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [110]

--------------------------------------------------------------------------------

No.

--------------------------------------------------------------------------------

Anshool Singhi, JP Morgan Chase & Co, Research Division - Research Analyst [111]

--------------------------------------------------------------------------------

Yes. So none of your vessels have been impacted because of that?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [112]

--------------------------------------------------------------------------------

That's correct.

--------------------------------------------------------------------------------

Operator [113]

--------------------------------------------------------------------------------

Our next question, Adam from MIDF Research.

--------------------------------------------------------------------------------

Adam Rahim Mohamed, MIDF Amanah Investment Bank Berhad, Research Division - Research Analyst [114]

--------------------------------------------------------------------------------

Just an extension to Alex's question early on. So regarding the LNG segment, right, I understand that in the third quarter last year, the number of dry-docking days was around 200 days. So I just want to know what is the number of dry-docking days for the third quarter of this year? That's the first one.

And secondly, what was the term-to-spot ratio for Suezmax again? Yes, that's all for me.

--------------------------------------------------------------------------------

Unidentified Company Representative, [115]

--------------------------------------------------------------------------------

184 -- 125 days for this quarter.

--------------------------------------------------------------------------------

Adam Rahim Mohamed, MIDF Amanah Investment Bank Berhad, Research Division - Research Analyst [116]

--------------------------------------------------------------------------------

Okay. And for the term to spot for Suezmax?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [117]

--------------------------------------------------------------------------------

It's 57, 5-7.

--------------------------------------------------------------------------------

Operator [118]

--------------------------------------------------------------------------------

Our next question, Ben from Macquarie.

--------------------------------------------------------------------------------

Ben Shane Lim, Macquarie Research - Research Analyst [119]

--------------------------------------------------------------------------------

Very quickly. I think you mentioned the term to spot for the segments. That's for the third quarter, if I'm not mistaken. Could you give us the breakdown for the fourth quarter? And also, may I ask the number of vessels that were effectively not working in the third quarter? Were the chemical tankers that you're looking to dispose working during the third quarter?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [120]

--------------------------------------------------------------------------------

First question for fourth quarter, I think we're not -- we're still in the middle of the fourth quarter, so we don't have (inaudible). So we will report that in the next call. As for the chemical vessels, I think they are being employed.

--------------------------------------------------------------------------------

Unidentified Company Representative, [121]

--------------------------------------------------------------------------------

Only 1 was -- only 1 of the 7 were closed, so the remaining 6 will still be in operation.

--------------------------------------------------------------------------------

Ben Shane Lim, Macquarie Research - Research Analyst [122]

--------------------------------------------------------------------------------

Okay. Okay. So your fleet utilization is -- other than the 1 VLCC that you mentioned is undergoing the scrubber installation, they're all working?

--------------------------------------------------------------------------------

Unidentified Company Representative, [123]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Operator [124]

--------------------------------------------------------------------------------

Our next follow-up question, Kong Ho Meng from UOB Kay Hian.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [125]

--------------------------------------------------------------------------------

Sorry, just to go back again to your -- I'm comparing on your JV associated income in the third quarter of ['19] versus the previous corresponding quarter of second quarter '19? For the second quarter of '19, you had the -- sorry, the Ruby extension of USD 10 million and you have -- and your recorded JV profit was more than MYR 100 million. And this quarter, you have MYR 45 million write-back of provision for the Brazilian JV and your JV income is only MYR 82 million. So ignoring those one-off items, what was the decline on the Q-on-Q profit to the JV income?

--------------------------------------------------------------------------------

Unidentified Company Representative, [126]

--------------------------------------------------------------------------------

Sorry, I didn't get what you said. Can you repeat yourself, please?

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [127]

--------------------------------------------------------------------------------

I'm comparing on your JV income, third quarter versus second quarter, quarter-on-quarter comparison. In your second quarter, your total JV income was about MYR 100 million, and that included the Ruby extension, I believe that's about USD 10 million. In the third quarter, the current quarter, it is MYR 82 million, and that included a MYR 45 million provision write-back of your Brazilian [dependent in the site]. So the -- if you treat those items as one-off items, your JV income is still a quarter-on-quarter decline. So I just want to know what -- why is there such a decline?

--------------------------------------------------------------------------------

Unidentified Company Representative, [128]

--------------------------------------------------------------------------------

So just to get your question, you're trying to reconcile the second quarter JV income of MYR 100 million to the third quarter of [MYR 82 million], correct?

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [129]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Unidentified Company Representative, [130]

--------------------------------------------------------------------------------

Just give me a minute.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [131]

--------------------------------------------------------------------------------

Yes, no problem.

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [132]

--------------------------------------------------------------------------------

Ho Meng, give us a minute, yes?

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [133]

--------------------------------------------------------------------------------

Okay, no problem.

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [134]

--------------------------------------------------------------------------------

Ho Meng, we will get back to you on that. We'll get back to you on that, yes? Is there any other questions?

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [135]

--------------------------------------------------------------------------------

So far no questions -- sorry, just to double-check again, back on the chemical tankers when you mentioned the cost savings after disposing the 7 tankers is USD 5 million. That's on a per quarter basis, right? Just to double-check.

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [136]

--------------------------------------------------------------------------------

Overall.

--------------------------------------------------------------------------------

Unidentified Company Representative, [137]

--------------------------------------------------------------------------------

Annual.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [138]

--------------------------------------------------------------------------------

Annual, USD 5 million?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [139]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Unidentified Company Representative, [140]

--------------------------------------------------------------------------------

That's correct.

--------------------------------------------------------------------------------

Ho Meng Kong, UOB Kay Hian Research Pte Ltd - Senior Analyst [141]

--------------------------------------------------------------------------------

And on a quarterly basis, your overall chemical fleet is a loss of USD 7 million, USD 8 million, is that a quarterly loss or an annual loss for the whole chemical fleet? Just when you mentioned about USD 7 million to USD 8 million loss from the chemical fleet.

--------------------------------------------------------------------------------

Unidentified Company Representative, [142]

--------------------------------------------------------------------------------

Just give us a minute, Ho Meng.

Yes. We will come back to you on that one because, currently, the numbers that we have are on a consolidated basis, for the overall (inaudible).

--------------------------------------------------------------------------------

Operator [143]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question Lee Yen Ling from Maybank.

--------------------------------------------------------------------------------

Yen Ling Lee, Maybank Kim Eng Holdings Limited, Research Division - Research Analyst [144]

--------------------------------------------------------------------------------

Just one question on petroleum. I would like to compare Q-on-Q earnings performance. So if I look at the tanker rate for 3Q is actually slightly better than 2Q, but the losses this quarter is higher than last quarter. So could you share the reason?

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [145]

--------------------------------------------------------------------------------

The loss is actually inclusive of the impairment of the 7 A Class.

--------------------------------------------------------------------------------

Yen Ling Lee, Maybank Kim Eng Holdings Limited, Research Division - Research Analyst [146]

--------------------------------------------------------------------------------

Yes. Okay. But even if I take out the losses, 7 million this quarter, last quarter was 1 million.

--------------------------------------------------------------------------------

Unidentified Company Representative, [147]

--------------------------------------------------------------------------------

Yes. So it's basically -- there's a lower blended charter rates for the Aframax sector.

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [148]

--------------------------------------------------------------------------------

Maybe just expand a little bit on that. In the current quarter, the quarter 3, the number of lightering days was lower. So as you know, lightering is a segment where we run higher-than-normal charter rates.

--------------------------------------------------------------------------------

Yen Ling Lee, Maybank Kim Eng Holdings Limited, Research Division - Research Analyst [149]

--------------------------------------------------------------------------------

Okay. The lightering days why have changed, why has cost dropped in lightering days?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [150]

--------------------------------------------------------------------------------

I think there was a slightly -- reduction -- there was a reduction in the U.S. crude oil imports and exports during the quarter.

--------------------------------------------------------------------------------

Yen Ling Lee, Maybank Kim Eng Holdings Limited, Research Division - Research Analyst [151]

--------------------------------------------------------------------------------

I see. Okay. I see. So based on the breakdown of the time and spot mix for VLCC, Aframax, Suezmax, VLCC, Suezmax also has quite a significant spot exposure. So 3Q, the spot rate actually went up quite significantly for VLCC. But I don't see your segment benefiting. So probably, it's mainly because of lower lightering days.

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [152]

--------------------------------------------------------------------------------

I think the bulk of the increases came towards the end of quarter 3 and going into quarter 4. It's probably the timing, the timing, yes?

--------------------------------------------------------------------------------

Unidentified Company Representative, [153]

--------------------------------------------------------------------------------

I think maybe to give you a bit more light, if you look at the comparison between quarter 2 and quarter 3, VLCC today performed better. But like Vincent said, it was towards the tail end of quarter 3 where the rates went up and also our -- the bulk of our vessels are on [term] charter. So between the 2 quarters, Aframax end product performed worse in Q3 compared to Q2.

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [154]

--------------------------------------------------------------------------------

Yes. And the bulk of our fleet is actually the Aframax fleet.

--------------------------------------------------------------------------------

Yen Ling Lee, Maybank Kim Eng Holdings Limited, Research Division - Research Analyst [155]

--------------------------------------------------------------------------------

Okay. All right. Noted. The offshore, if I strip out all the one-off, your offshore actually this quarter is better than second quarter also. Do you know the reason?

--------------------------------------------------------------------------------

Unidentified Company Representative, [156]

--------------------------------------------------------------------------------

You're talking about Q3 to Q2, is that right?

--------------------------------------------------------------------------------

Yen Ling Lee, Maybank Kim Eng Holdings Limited, Research Division - Research Analyst [157]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Unidentified Company Representative, [158]

--------------------------------------------------------------------------------

Basically, if you look at the one-off items in Q2, we have got a USD 10.4 million gain from FPSO Ruby. And we also have got an impairment charge for [Chengdu] of USD 7 million, right?

--------------------------------------------------------------------------------

Yen Ling Lee, Maybank Kim Eng Holdings Limited, Research Division - Research Analyst [159]

--------------------------------------------------------------------------------

So total is 32 million for second quarter. And then third quarter, if I take -- put it back the demobilization costs, 5 million, then third quarter is 39 million, so it's better than second quarter.

--------------------------------------------------------------------------------

Eslin Halimi;Head, Financial Reporting, Governance and Budget Finance, [160]

--------------------------------------------------------------------------------

The provision for demob is actually not considered a one-off item.

--------------------------------------------------------------------------------

Operator [161]

--------------------------------------------------------------------------------

Our last question, Ben from Macquarie.

--------------------------------------------------------------------------------

Ben Shane Lim, Macquarie Research - Research Analyst [162]

--------------------------------------------------------------------------------

I just wanted to follow up on, firstly, the term to spot. Sorry to stick to this. I know you can't give a specific number, but should we expect more vessels on spot in the fourth quarter?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [163]

--------------------------------------------------------------------------------

I think we will try to, but I can't commit that it will be -- that will be the outcome.

--------------------------------------------------------------------------------

Ben Shane Lim, Macquarie Research - Research Analyst [164]

--------------------------------------------------------------------------------

Okay. Fair enough. And then just last question on your tenders, right? I know you are bidding for some projects, some new vessels. Could you give us some color on any projects and for which segment is likely to close before end of this year? I know Mero-3 is a next year story.

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [165]

--------------------------------------------------------------------------------

It's quite difficult for us to pin down which one is going to proceed here because it very much depends on the client on the other side. As of today, I think there will be a few projects that we are targeting to be closed this year. And in terms of segments, I think we are quite balanced for all the 3 segments of our businesses, i.e., LNG, offshore as well as petroleum.

--------------------------------------------------------------------------------

Ben Shane Lim, Macquarie Research - Research Analyst [166]

--------------------------------------------------------------------------------

So you have potential awards coming through for all your segments by end of this year, potentially?

--------------------------------------------------------------------------------

Vincent Ng, MISC Berhad - General Manager of CPD [167]

--------------------------------------------------------------------------------

That's right, that's right.

--------------------------------------------------------------------------------

Operator [168]

--------------------------------------------------------------------------------

As we have come to the end of the Q&A session, I will now hand the session back to Rozainah for closing comments. Over to you.

--------------------------------------------------------------------------------

Rozainah Binti Awang, MISC Berhad - General Manager of CPD [169]

--------------------------------------------------------------------------------

Thank you, Pak Hadi. Ladies and gentlemen, this concludes today's conference call. On behalf of MISC Berhad, we would like to thank you for your participation. For those who have not received our presentation slides, please do contact us, and we will gladly provide a PDF version.

To the sell-side analysts, we would appreciate that you forward a copy of your published research report to the MISC Investor Relations team for our reference. Thank you once again, and have a good evening.