MISC Berhad (MISC) Earnings Call Transcript & Summary

A very good evening, ladies and gentlemen, and thank you for joining our third quarter financial year 2025 Analyst Briefing. My name is Faizan from the Investor Relations team, and I will be your MC for today's session. We are pleased to be joined by Encik Zahid Osman, President and Group CEO; Encik Raja Azlan Shah Raja Azwa, Chief Strategy and Sustainability Officer; Encik Afendy Ali, Chief Financial Officer; and Encik [ Adam Fazil ], Head, Strategy and Investor Relations. Before we begin, please refer to the disclaimer statement in the presentation deck. This presentation may include forward-looking statements relating to the future plans and expectations. Actual results could differ due to unknown risks, uncertainties and other factors beyond MISC's control. With that, I now would like to invite Mr. Zahid Osman, our President and Group CEO, to deliver his opening remarks and share highlights of the quarter.

Thanks, Faizan. [Foreign Language] and good afternoon, everyone. It's good to come back again this quarter to share with you in terms of the progress of our delivering progress strategy as well as our financial performance for quarter 3 as well as year-to-date. I think this quarter results tells a clear story. MISC continued to deliver resilient profitability and strong cash flow while advancing our enterprise strategy. While part of the market remains soft, our fundamentals are firm and the action we are taking today are helping us to build a stronger foundation for the group. If I can go to the key highlights. Let's talk about the financial performance. If you look at our revenue, it remained stable at $662 million, rising 5% quarter-on-quarter, supported by higher contribution from the Petroleum and offshore segments. Group profit after tax strengthened to $131 million, up 19% quarter-on-quarter and 64% year-on-year. This performance reflects strong operating results compared to the same period last year. In terms of cash flow from operations, it remains healthy at $327 million, 32% higher year-on-year, driven by robust collections and disciplined cash management. Supported by our solid cash position, we declared and the Board have declared a third interim dividend of MYR 0.08 per share, consistent with our prior dividend's payout. These results demonstrate a resilient and a well-anchored portfolio in a volatile and uncertain markets. Let me talk to you with regards to the progress that we have made on our delivering progress strategy. Delivering Progress Strategy, if you recall, have 3 pillars: the resilient core, our profitable new energy pillar as well as our decarbonization pillar. Let's see what we have achieved to date on our resilient core. This quarter, we delivered 3 new LNG carriers to QatarEnergy under the consortium partnership, Al Mas'habiyyah, Al Zuwair and Fat'h Al Khair. These timely deliveries underscore disciplined execution and reinforce our position as a trusted partner in Qatar's long-term LNG expansion. The delivery of these 3 vessels also help us to strengthen our cash generation capability within the group to ensure that we can deliver the revenue and the cash flow consistently. We expect there will be more vessels coming in terms of delivery in the next quarter. In July this year, if you recall, I mean, we delivered the FSU Puteri Delima to PETRONAS Gas, it is the sail away to the permanent place in PETRONAS Pengerang terminal. The whole project was delivered safely with over 500,000 man hours with 0 LTI. We are very proud with our total project management team to deliver this project safely to our customer. These conversions of our existing old steam vessel into FSU reflects our strategy to repurpose older vessels into long-term value-accretive FSU assets for Malaysia's regasification needs. We also signed an MoU with PETRONAS Gas to explore a next-generation FSU solutions, including conversions options to enhance efficiency and sustainability at Sungai Udang. If you recall, I mean, we have 2 FSU currently in Sungai Udang. The current MoU that we have with PETRONAS will allow us to see what more we can do in that FSU, including the rejuvenation as well as the replacement of that FSU. Collectively, we are happy that this achievement will deepen our position in the gas value chain, reinforce our industry partnership and strengthen the resilience of our core business. Today, our Gas fleet comprises of 41 vessels, 31 LNG carriers, 3 FSUs, 6 ethane carriers as well as 1 LBV, the LNG bunker vessels. We expect in our schedule to receive another 17 vessels between now to 2028. This new delivery program marks one of the most extensive fleet renewal cycle in MISC history. We hope with this rejuvenation of our fleet will help us to continue to deliver the consistent and predictable cash flow to the group. If you look at the next one under the profitable new energy, in September, MISC and Samsung Heavy Industries received approval in principle from Bureau Veritas, their Classification Society for the world's first ammonia-fuelled LR2 tanker powered entirely by Proton Exchange Membrane Fuel Cells or MEPEMFCs technology. This design eliminates direct carbon emissions while meeting the growing demand of global shippings, position is more among the selected few owners that have this low carbon or zero carbon maritime solutions. We're very happy with this milestone because it shows and it demonstrates the strength of our partnership with the relevant parties within the value chain. It's also deepened our technical capabilities as well as helping us to continue building a stronger foundation for us to deliver on this pillar of profitable new energy to support the achievement of our MISC 2030. And on the decarbonization, we also are making positive progress with regards to our emissions reduction effort. I think we have achieved to date, the fleet average GHG Intensity improved to 4.89 per tonne miles -- per tonnes nautical miles is about 3% lower quarter-on-quarter as well as 7% lower year-on-year. In totality, we have achieved so far 36% reduction than our 2008 baseline. I think this is very important because shipping has a very stringent emission requirement. What we are doing now will help us to ensure that we have the relevant asset, we have the relevant expertise to compete in this sector, okay? If we -- our effort in the sustainability as well as the ESG also received recognition from the industry. At the recent Star ESG Positive Impact Awards 2024, we received a gold award for Biodiversity and Silver Award for Human Rights and Labor standards. These are a meaningful recognition on the effort that we put in, in both categories or both sectors. The crews of Seri Emperor and Seri Daya, these are our vessels, was honored with MPA, this is the Singapore authority at the Safety@Sea Awards 2025 for the extraordinary courage in rescuing operation in the rough condition. I think this also reflects our culture, our safety culture with regards to supporting the industry to ensure it continues to maintain at the highest standard. I think in closing, while market headwinds persist, our path forward is clear. Fleet rejuvenation and disciplined execution to build a stronger portfolio with resilient profitability and cash flow. That is our continued effort and focus. We are building a business that is stronger, more efficient and future-ready to achieve our 2030 ambitions and delivering progress strategy is providing us the blueprint and the pathway for us to achieve that. With that, I will now hand over to the team to take you through in detail our quarter 3 results and the market outlook. So thank you.

Thank you, Zahid, for your opening remarks as well as highlights for the quarter. Next, we will proceed with the financial performance update by Encik Afendy, followed by the market outlook by Encik Raja Azlan. Encik Afendy?

Thank you, Faizan. [Foreign Language] and a very good evening, ladies and gentlemen. Thank you for joining us today. I will run through the MISC Group results for the third quarter of 2025. For the quarter ended 30th September 2025, the Group recorded revenue of USD 662 million, which is marginally lower compared to the corresponding quarter last year. The softer year-on-year revenue reflects the dynamics within our diversified portfolio. Our Gas segment posted a lower revenue due to reduced earning days following contract expiries and vessel disposals, coupled with softer spot charter rates. Revenue in Marine and Heavy Engineering also declined as several major key projects are nearing completion, which led to reduced activity, while newer projects are still in the early stages of execution and have yet to contribute meaningfully to the top line. These declines were partially offset by stronger contributions from the Petroleum segment, which has benefited from the higher freight rates and improved earnings base during this quarter. The Offshore segment also delivered a substantial uplift with revenue almost doubling year-on-year, supported by contributions from the acquired FPSO, FPSO Kikeh and the transition of FPSO Mero-3 from construction into operational phase. Against the preceding quarter, the Group revenue increased by 5%, driven primarily by higher revenue recognition in the Marine and Heavy Engineering segment as newly secured projects transition into more active phases of construction. Moving on. The Group reported an operating profit of USD 157 million for the quarter, representing a solid 26% increase compared to the same period last year. This year-on-year uplift was underpinned by the stronger performance of our offshore business, which transitioned from a [indiscernible] position in the corresponding quarter to a meaningful profit contribution in the current period, aligned with the operational commencement of FPSO Mero-3. The Petroleum segment also recorded steady earnings growth in line with the revenue uplift recorded for the quarter, as I mentioned earlier, while our Marine and Heavy Engineering delivered higher operating profit year-on-year due to favorable finalization of several completed projects negating the lower revenue. These gains were moderated by lower contributions from our Gas segment, driven by the revenue factors mentioned earlier, although vessel operating costs were correspondingly lower. Collectively, these factors drove a strong Group operating margin and reaffirm the stability of our portfolio despite market-specific rises. In contrast to the stronger year-on-year performance, the Group operating profit declined by 11% quarter-on-quarter, primarily due to higher construction costs of Gas project, while the preceding quarter had benefited from early termination compensation for 2 LNG carriers in the Gas segment. While the group continued to deliver resilient operating profit, our headline profitability was impacted by impairment provisions in the Gas segment. Profit after tax for the quarter stood at USD 131 million, an increase of 64% from USD 80 million in the corresponding quarter. The year-on-year improvement was driven by the stronger operating performance, particularly from Offshore together with gains from vessel disposals in the Petroleum segment. These gains were partially offset by higher vessel impairments recorded during the quarter. Excluding the impairments, the Group profit after tax would have further improved as the profitability increased by 69% than the profit after tax in the corresponding quarter. Compared to the preceding quarter, profit after tax improved by 20% from USD 110 million to USD 131 million. The quarter-on-quarter increase reflects strong underlying operating performance, lower impairments and gains on vessel disposals that were recognized during the period. These movements collectively contributed to a strong bottom line for the Group excluding the impairments, the profitability increase mentioned earlier narrowed to 5% compared to the preceding quarter. But overall, profit after tax growth remained strong despite normalizing the impairment. Cash flow from operations remained robust at USD 327 million in quarter 3 2025, this represents a meaningful increase from USD 247 million in the corresponding quarter, primarily driven by stronger collection from customers, consistent with the revenue and operational performance during the period. Against preceding quarter, the cash flow from operations moderated from USD 374 million recorded in quarter 2 2025, yet still reflects a healthy cash generating capacity across our diversified portfolio. Overall, our operating cash generation continues to be healthy, underscoring the strength of our earnings and the resilience of our portfolio amid varied market conditions. Next, as of September 2025, the group's balance sheet remains stable with only marginal movements in total assets, equity and liabilities compared to December 2024, while the group's gross gearing ratio remained unchanged. The marginal decline in net gearing ratio was mainly attributed to the increase in cash balances during the quarter. The shift in debt composition mix from December 2024 mainly comprised of the additional drawdown of floating-rate debt in 2025. Next. Consistent with the previous slide, debt balances as at September 2025 was comparable to December 2024. Meanwhile, the increase in cash was supported by higher cash generated from operations, partially offset by the CapEx spending and dividend payout during the quarter. Next. For the 4 business segments, in the Gas segment, the revenue for quarter 3 2025 came in at USD 123 million, comparable from USD 122 million in the preceding quarter, but lower by 19% compared to USD 152 million in quarter 3 2024. The year-on-year decline reflects lesser earning days arising from contract expiries and vessel disposals as well as softer spot charter rates, as I mentioned earlier. Operating profit for the quarter recorded at USD 36 million, lower than USD 58 million in the same period last year, primarily driven by the revenue factors mentioned earlier. The vessel operating costs, despite that, the Gas team has worked hard to ensure that the vessel operating costs were kept at a lower cost. Against preceding quarter, operating profit declined by 36% quarter-on-quarter, driven by higher construction costs for a project in the current period alongside the early termination compensation for 2 LNG carriers recognized in the preceding quarter. Profit after tax stood at USD 12 million, down by 68% compared to USD 36 million in quarter 3 2024 and 24% compared to USD 15 million in quarter 2 2025, further impacted by impairment provisions. Excluding those impairments, the decline would have narrowed to 42% compared to the corresponding quarter, while the decline against preceding quarter would have been 44%. Petroleum segment remained stable as revenue for quarter 3 2025 increased to USD 303 million, up from USD 262 million in quarter 3 2024 and USD 299 million in the preceding quarter. The growth was driven by higher freight rates and earning days during the quarter. Operating profit subsequently rose to USD 83 million, 8% higher than USD 76 million recorded in the same quarter last year and 80% higher than USD 70 million reported in quarter 2 2025 in tandem with higher revenue, as mentioned above. The profit after tax increased to USD 91 million, up by 41% as compared to quarter 3 2024 and 64% against quarter 2 2025, consistent with the higher operating profit recorded and further supported by gains on vessel disposals in the quarter. The Offshore segment continued to be a key profitability contributor in the current quarter. Revenue for quarter 3 2025 was reported at USD 114 million, a significant increase from USD 59 million in the same period last year and higher than USD 106 million in quarter 2 2025. The uplift is primarily attributable to contributions from FPSO Kikeh as well as FPSO Mero-3, which has come into the operational phase. Operating profit rose sharply to USD 48 million compared to an operating loss of USD 6 million in quarter 3 2024, and -- but lower than USD 53 million of profit recorded in the preceding quarter. Correspondingly, profit after tax followed a similar trajectory against the top line as it surged to USD 26 million compared to a loss of USD 34 million in the corresponding quarter, but lower than USD 30 million in quarter 2 2025. Moving to our last segment, Marine and Heavy Engineering. Revenue for quarter 3 2025 stood at USD 122 million, significantly lower than USD 204 million in quarter 3 2024, but higher than USD 100 million in quarter 2 2025. The year-on-year decline was mainly due to the pacing of key projects nearing completion and the new ones are still at the early stages, while the quarter-on-quarter increase was driven by newly secured projects progressing into the more active construction phases. Operating profit came in at USD 7 million compared to USD 5 million in quarter 3 2024 and USD 3 million in the preceding quarter. The improvements were supported by favorable finalization of completed projects. Profit after tax stood at USD 7 million, broadly stable compared to USD 4 million in quarter 3 2024 and USD 2 million in quarter 2 2025, consistent with the improved operating performance for the segment. In summary, MISC has delivered a strong financial performance in this quarter. For our Gas segment, we continue to monitor and mitigate as much as possible given the weak spot market. And finally, our stable cash generation has enabled MISC to pay consistent dividends to our shareholders. With that, I conclude my financial presentation, and I'll pass it back to Faizan. Thank you.

Thank you, Encik Afendy. Next, Encik Raja Azlan.

Thank you, Faizan. [Foreign Language] very good evening to honorable shareholders, buy side and sell-side analysts. I'll take us now through the market environment, looking at the LNG and petroleum shipping as well as the offshore market. In terms of LNG shipping, the LNG shipping market, the vessel order book is expected to moderate in 2025 compared to the high levels we've seen in recent years. As of the third quarter, the order book to fleet ratio stands now at 41% compared to 49% in 2025, and this follows the increased newbuilding deliveries and a slowdown in new vessel orders amid the high newbuild prices and continued regulatory uncertainty. And this slowdown is further driven by limited shipyard capacity through 2027. The order book is expected to ease further until newbuild activity resumes. Despite the lower order book, vessel deliveries are expected to remain high through 2026 to 2030, and the LNGC fleet is projected to grow at a compounded growth rate of about 8% between '25 to 2030. with more than 500 new LNG carriers anticipated to enter the market by 2030. For steam carriers, they are particularly feeling the heat as vessel oversupply has dampened demand and is weighing heavily on the earnings of the older steam LNG carriers. Next slide, please. In terms of LNG supply side, the outlook for new LNG project approvals remain positive. In the first 9 months of 2025, 6 projects with 51 mtpa have reached FIDs and a further 4 are expected by the year-end. In 2026, the momentum is expected to pick up substantially with close to about 100 mtpa of pre-FID projects, mainly coming from the U.S. and Qatar, among other countries. 2026 is expected to be a pivotal year for project development and planned capacities after significant delays over the past year. Global liquefaction capacity is projected to grow about 10% compound annual growth per year between '25 to 2030, driven by these new capacity additions. While a new wave of liquefaction capacity is projected to enter the market, actual supply will depend on project startups, which may be affected by feed gas availability, regulatory changes and evolving environmental, social and economic considerations. Next slide, please. In terms of the market environment for the LNGC rates, in the short term, the LNGC rates are expected to remain soft to 2025, driven by the vessel oversupply from strong newbuild deliveries and more vessels coming off long-term charters. Steam turbine LNGC rates are expected to remain under pressure due to competition from modern LNGCs, and this is likely to accelerate the phaseout of older steam turbine carriers. The weak market conditions make it difficult for shipowners to maintain older tonnage and limited opportunities for employment are expected to prompt many owners to consider vessel conversion or scrapping. Given the weaker market outlook for these older vessels, MISC will continue to assess the fair value of these older vessels, these older steam LNG carriers, which may lead to additional impairments. Despite the headwinds, LNGC shipping remains our strategic core element -- core segment, and we continue to rejuvenate our fleet with modern fuel-efficient vessels secured on long-term charters consistent with our resilient core strategy. By 2028, our Gas segment is expected to deliver close to an additional 20 modern eco-efficient vessels, which will then lift the proportion of next-generation ships in our fleet to over 70% from the current 30% to 40%. Next slide, please. In terms of Petroleum shipping, the crude tanker order book expanded further in the third quarter of 2025, following a surge in new orders, raising the order book to fleet ratio to about 14%. Between '26 to 2030, another around 440 new crude tankers are expected to be delivered and deliveries are projected to peak in 2027 when most of the Suezmax and VLCC orders placed over the past 2 to 3 years are scheduled to enter the fleet. Next slide, please. In terms of the Petroleum shipping market, it is expected to remain firm for the rest of 2025, supported by strong vessel demand driven by increased OPEC+ output and sustained tonne-mile demand. Charter rates continue to be supported by tight vessel availability stemming from ongoing sanctions and limited fleet growth in 2025, while geopolitical uncertainties continue to shape crude trade flows. The global crude oil market is forecasted to remain oversupply, and this will keep freight rates elevated through the 2026. Our Petroleum products segment continues to demonstrate resilience, underpinned by a solid base of long-term charters complemented by proactive efforts to optimize the fleet utilization across spot markets, lightering operations as well as time charter opportunities to strengthen overall earnings and profitability. Next slide, please. Moving on to Offshore. Upstream CapEx is projected to grow steadily, reaching $211 billion by 2029, surpassing the levels that we have seen in the previous decade. The project -- the trend reflects a favorable industry outlook driven by firm global energy demand that continues to support investments in upstream exploration and production. As a result, the demand for floaters, FPSOs in particular, is expected to remain strong with close to 70% of new projects concentrated in Latin America and Asia Pac. This indicates a healthy pipeline of potential awards for floaters, reinforcing a resilient long-term outlook for the offshore market. MISC is positioned to capitalize on this up cycle in targeted regions such as Asia Pac, South America, as well as Africa, while managing affordability and risk through strategic partnerships as well as a balanced contract structure across L&O, BOT and EPC and O&M contract structures. With that, I end my presentation, and thank you very much, and back to you, Faizan.

Thank you, Encik Raja Azlan. We will begin the Q&A session shortly. [Operator Instructions] First, we have a question from Encik Hazmy Hazin from CLSA.

Hazmy here from CLSA. I think I just want to check on the rates for LNG that's relevant to MISC for this quarter compared to the second quarter, how did that look like? Is it gradually improving or flattish or worse?

Yes. For the LNG, basically, we have divided into 2 type of rates, which is our term contracts. So our term contract has been quite stable, right? But it's the spot contract that has come down quite significantly. And that's partly because what I've mentioned, and I think all the 3 of us primarily has mentioned consistently for the last 30 minutes, you see the spot rate has come down quite a lot because of the oversupply of the LNG vessels. So our spot -- our term to spot rate for LNG is about 80 -- for the current quarter, it's about 95, but that's also partly because for the spot vessels that we are not able to secure any clients or customers, we have put them on lay up, yes.

Sorry, I mean comparing the spot on quarter-on-quarter basis, what's the percentage like increasing or flattish?

The spot rate has come down by about -- well, we had -- in quarter 3 last year about -- in the range of about $50,000 to $60,000. And for the current quarter '25 is about $30,000 to $35,000.

Compared to last quarter?

Compared to last quarter, well, we had one vessel at a very high rate of about $80,000, but that's an exception actually.

So Hazmy, if I just can add, I mean, we -- you are seeing a lot more in terms of percentage of our LNG vessel is on term charter compared to spot charter in this quarter because many of our spot charter vessels that we cannot find employment, we put them on [indiscernible]. So I think that's what we are doing to optimize costs as well as just to ensure that we also reduce the emission from this vessel.

And just going forward, just in terms of -- you mentioned contract expiring, may I know like how many contracts are expiring going into 2026? And does that mean sort of if rates stay the same in terms of earning days, will that sort of impact the earnings going to be lower in the coming quarters?

I mean over the next 3 years, you're going to see, I think, another 8 gas vessels are going to be expiring. But as I mentioned earlier, over the next 3 years, we're going to be receiving the delivery of close to 20 new energy vessels.

Hazmy, can you hear us?

Yes, you can go ahead and continue with what you mentioned.

Okay. Like what I mentioned was that over the next 3 years, we will have around 8 or so vessels expiring. But at the same time, we are going to be taking delivery of close to 20 new LNGC vessels. So that will help to supplement or to make up the revenues and cash flows of the gas unit going forward.

Next, we have a question from Raymond.

This is Raymond here from CGS International. So Afendy talked just now about 2 LNG premature terminations. I didn't hear it very clearly. Is that correct?

Yes, that's correct, Raymond. Those vessels were due for expiry later part of this year and early next year. So I think given the -- these are all steam vessels. So I think we have agreed with our charterer to have an early termination, and we have been compensated through the early termination in quarter 2 -- I mean, last quarter, not the current quarter.

I see. Okay. So you're talking about a past event actually?

Correct, yes. We only got the composition in quarter 2 for those 2 steam vessels.

Right. I don't recall this being mentioned in the quarter 2 briefing.

No, I think the question is actually -- Raymond, can you repeat again your question, Raymond, please?

I did not recall this being mentioned in the briefing 3 months ago.

Presumably, those numbers were comparable to quarter 1, Raymond, yes. Maybe this did not come out as a huge variance. But it is the variance for this quarter for Gas given the expiry of the contracts as well as we had a lot of vessels being laid out as part of our cost optimization effort.

Okay. May I know the identity of the vessels and also the quantum of the compensation received last quarter?

I'm not sure we can be specific on the details at this point, Raymond, because we are bound by our confidentiality with our clients.

Okay. That makes things a bit difficult.

Yes. But whatever it is, Raymond, the economics were kept whole. Whenever we do contract termination or whatever, it is done in a way that we are no worse off.

Okay. So basically, the profits last quarter were bumped up by one-off events, which actually, I would have preferred that you had disclosed it last quarter. It would have made more sense actually. But anyway, yes, that's all the questions I have.

Please feel free to ask any questions. So do raise your hands if you have any. Okay, we have a question from Ho Meng.

Just to follow up on the -- for the -- your Gas earnings, just to double check the impairment this time, is it related to the 2 early terminations that was done in the second quarter? And also, you also mentioned that you have 3 new LNG vessels have started their charter, right? So just to gauge how much -- if we net out the impairments and everything, how much is the LNG earnings, the dropoff coming from contracts that expired and also the -- how much of the earnings have boosted because of new vessels?

Yes. I mean for the 2 contracts that were terminated in the quarter 2, there has not been any impairment impact to those 2 vessels. But generally, the higher impairment that -- sorry, the impairment that we have seen in quarter 3 is slightly lower compared to quarter 2. But I think quarter 2 because we saw about 20% drop in market value for the vessels, whereas in quarter 3, the drop in market value is only about 10%. So cumulatively for the year, for the 3 quarters, we have seen a 30% drop in the market value for those older vessels.

Okay. And how about, whether the contribution from new vessels was significant relative to those that have expired?

Yes. The new vessels that has come, they are all our JV vessels. So you will not be able to see the significant contribution because at the first couple of months, there will be some setup costs that will be negating the income for the first quarter. So you won't be able to see that. The share of profit is almost breakeven for the first quarter. But these are all our joint venture.

Yes, yes, I recall that. The Mero-3, you said it was ramped up in terms of the earnings on a quarter-on-quarter basis, did it ramp up? And also what is the term to spot ratio for the Petroleum side?

The Mero-3, obviously, when we say quarter-on-quarter, quarter 2, we have the project availability fees that we have managed to get from PETRONAS. So that's what I mentioned earlier, if you look at the offshore operating profit is slightly higher in quarter 2 compared to quarter 3, right? Obviously, last year, there's no operation on Mero-3. For Petroleum segment, the term to spot ratio is about 75%-25% for current year versus about 90% -- 90%-10% in last year.

Current year, 25%, this is primarily Aframax or same for the 3 vessel classes?

Suezmax and Aframax. Those are the ones that have got a higher proportion of spot tankers.

Okay. One more question. The LNG side, sorry, how many vessels that are idle right now that you haven't been able to dispose or set new opportunities for them yet?

I think we have about 7 vessels that's on layup.

So, 7 On layup. And then you said earlier potentially another 8 more contracts that are expiring, right? So in the worst case, if those 8 cannot find any job or dispose, then it could be 15 left that are maximum idle?

Yes. I mean if you look at the industry as a whole, right, about 1/3 of all the LNGC vessels are steam, for which this year, you're going to see the industry going to scrap about 50% of the steam vessels. So unfortunately, that is the nature of the industry now. Everybody is moving on to the more modern vessel. Yes, so chances are there will be some scrapping that we need to do now.

I think you shouldn't associate the number of vessels that are going to be laid up. It's just a simple addition, Ho Meng. I think what we have now is what Afendy mentioned around 7. We are hoping to make a decision on these vessels within next year, either to scrap or to turn it into something else. But over the next 3 years, there will be another, what Azlan mentioned, about 8 vessels that is coming out of long-term charter. We still haven't decided yet what we're going to do with those vessels. I think -- so we will make that decision as and when coming off charter, Ho Meng.

I got it. But ideally speaking, you would prioritize rechartering those 8 expiring vessels, right, rather than the ones that is already on idle?

Yes, maybe it could be. But we are hoping for the current vessel that we are on layup, we want to make a decision sooner rather than keep the vessel for the next few years on layup.

Okay. Sorry, just one last question. I know you don't really disclose this, but in terms of your -- the cost that you incur for the decarbonization or you call it your decarbonization initiatives, is there any spike in terms of the cost or it's relatively the same in the past few quarters and even in this quarter?

Yes. I mean the cost will be incurred more in the future as the IMO starts to enforce the net zero framework rules. So today, the costs are kept to the minimum. Most of the emission reduction has come in the form of rejuvenating the fleet as well as running the fleet more efficiently on a just-in-time basis with some minor onboard CapEx, operational CapEx additional. So the amount of decarb expense that we incur today is not very big. We will only see this increasing over the next few years once the net zero penalties or carbon tax were to be made effective.